Mainland equity markets rebound

SHANGHAI - Stocks on the Chinese mainland rose on Thursday, with the benchmark index rebounding from close to the lowest level in a year. The advance came on speculation that losses were excessive relative to earnings prospects.

China Eastern Airlines Corp paced gains by carriers after the government said it will suspend approval for new railway projects. China Vanke Co led developers higher after the 21st Century Business Herald said some local governments have resisted expanding restrictions on home purchases. PetroChina Co rose after oil erased declines.

"The rebound came only because earlier losses were excessive and won't change the overall downward trend for the near future," said Yang Delong, a fund manager at China Southern Fund Management Co, which oversees $21 billion.

The Shanghai Composite Index added 1.27 percent to 2581.51 at the 3 pm close, the most since July 13, after falling as much as 1.7 percent. The CSI 300 Index increased 1.52 percent to 2866.92.

The yuan strengthened beyond 6.4 a dollar for the first time in 17 years, supported by the US Federal Reserve's pledge to keep interest rates at a record low and signs that China will use currency gains to help rein in inflation.

The Shanghai Composite has slumped 8.1 percent this year, extending 2010's 14 percent plunge, as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain price rises, which quickened to the fastest pace in three years in July. Stocks on the index trade at 11.8 times estimated earnings, a record low, according to data compiled by Bloomberg.

A gauge tracking developers in the Shanghai Composite advanced 1.2 percent. China Vanke added 1.30 percent to 8.55 yuan ($1.33). Poly Real Estate Group Co increased 1.82 percent to 11.20 yuan.

Some local governments have resisted the expansion of restrictions on home purchases to their jurisdictions, with only about 10 cities agreeing to limits, the 21st Century Business Herald reported on Thursday, citing unidentified people close to the Ministry of Housing and Urban-Rural Development.

There had been earlier expectations that about 60 cities would join the group of locations that have already introduced limits on home purchases, the newspaper reported.

China cut its 2012 affordable housing development target by 20 percent to 8 million units, Reuters reported on Wednesday, citing two unidentified people close to the government.

China Eastern surged by the 10 percent daily limit to 5.57 yuan. China Southern Airlines Co climbed 6.99 percent to 8.11 yuan. Air China Ltd rose 4.90 percent to 9.42 yuan.

China will suspend approvals on new railway projects and conduct safety checks on all current projects after a fatal train crash last month, the government said in a statement on its website on Wednesday.

Bloomberg News

(China Daily 08/12/2011 page17)