Shares rally as new economic plan boosts confidence
SHANGHAI - China's benchmark stock index rallied on Monday, making it the best performer among Asia's major markets in 2011, after the government said domestic consumption will drive economic growth over the next five years.
Gree Electric Appliances Inc, China's largest maker of home air-conditioners, climbed to a record high and Qingdao Haier Co, the country's biggest maker of refrigerators, gained 4.4 percent after Premier Wen Jiabao said incentives for rural purchases of home appliances may boost spending. PetroChina Co and China Shenhua Energy Co, the largest producers of oil and coal, surged as oil prices climbed.
"There will be active investment and construction activities at the beginning of the five-year plan," said Victoria Mio, a Hong Kong-based portfolio manager at Robeco Hong Kong Ltd, whose parent oversees $200 billion. "The A-share market has a window of opportunity for a rebound."
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, gained 53.90, or 1.8 percent, to 2996.21, the highest since Nov 15. It has surged 12 percent from the 2011 low set on Jan 25. The CSI 300 Index advanced 2 percent to 3334.51 on Monday.
The Shanghai gauge has rebounded 6.7 percent this year, after plunging 14 percent in 2010, on signs the world's second-biggest economy is withstanding tightening steps. Manufacturing growth is still expanding after the central bank boosted banks' reserve requirement ratio eight times since the start of 2010, while raising interest rates three times to rein in inflation that reached 4.9 percent in January, near the 28-month high of 5.1 percent in November.
The government will target 8 percent economic growth this year and "decisively" curb increases in prices that may threaten social stability, Wen said in his report on the opening session of the National People's Congress over the weekend. The premier had already disclosed an annual growth target of 7 percent for the five-year plan, running from 2011 to 2015, down from the previous 7.5 percent. The goals are routinely surpassed, with China's economy expanding an average 11 percent over the past five years.
Gree Electric jumped 4.6 percent to 22.59 yuan ($3.44). Haier gained 4.4 percent to 31.09 yuan. GD Midea Holding Co, China's second-biggest publicly traded appliance maker, rose 1 percent to 20.62 yuan. Hisense Electric Co, the biggest manufacturer of flat-panel televisions, climbed 5.7 percent to 14.43 yuan.
"Expanding domestic demand is a long-term strategic principle," Wen said. Subsidies for urban low-income earners and farmers and continued incentives for rural purchases of home appliances may boost spending, he said.
Retailers, electric appliances makers and agricultural companies may have reported 2010 earnings exceeding estimates, according to China International Capital Corp (CICC).
China's stocks may extend their gains this month as inflation probably eased in February and the government shifts its focus to "maintaining stability" amid Middle East tensions, Hou Zhenhai and Wang Hui, analysts at CICC, wrote in a report.
Bloomberg News
(China Daily 03/08/2011 page17)
