China stock index up 2.3 pct as banks recover

Updated: 2007-02-07 15:08

SHANGHAI - China's main stock index climbed 2.32 percent on Wednesday, led by banks, after Tuesday's rebound convinced some that the downtrend of the past week might have ended.

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"The index probably will hit 2,800 points soon, or even higher, since the short-term correction is over," said Zhang Yanbing, analyst at Kinghing Securities. "Financials are leading a rise of the whole market."

Other analysts said, however, that profit-taking in richly valued financials might not have finished, so any rise of the market would not be as fast as it was in recent months.

"Heavyweight banks' prices are still quite high, so they remain vulnerable to a small correction this week even though they fell so much last week," said Li Wenhui at Huatai Securities.

The Shanghai Composite Index stood at 2,737.664 points at midday, near its intra-day high of 2,745.387. It rose 2.42 percent on Tuesday.

Turnover in Shanghai A shares bounced back to 43.3 billion yuan ($5.7 billion) from 38.5 billion yuan on Tuesday morning, suggesting investors were continuing to return to the market. A total of 533 stocks rose while 283 fell.

Many said the index was likely to consolidate in coming weeks between 2,500 points, from near which it bounced on Tuesday, and strong resistance at 3,000, which the market twice tried and failed to break last month.

Baoshan Iron and Steel Co. , which ended 1.32 percent lower on Tuesday after news that the government may scrap value-added tax rebates on some steel products, surged 4.97 percent to 8.66 yuan on Wednesday morning.

Industrial Bank , which listed on Monday, jumped 6.34 percent to stand at 25.32 yuan at midday after hitting an intra-day high of 26.00 yuan -- its highest level since the listing.

Industrial & Commercial Bank of China , the most heavily weighted stock, rose 1.02 percent to 4.94 yuan.

Minsheng Bank climbed 4.87 percent to 12.50 yuan. The bank said on Wednesday that it planned to sell 2 billion new A shares, about 40 percent less than previously announced.

The property sector bounced after remaining sluggish during Tuesday's market rebound, suggesting investors were searching out laggard sectors. China Vanke rose 6.03 percent to 15.47 yuan.

Guangzhou Shipyard International rose its 10 percent daily limit to 25.08 yuan after Morgan Stanley said it had upgraded its rating on the stock to overweight from equal-weight on a potential asset injection from its state-owned parent.

Morgan raised its target for the A shares to 30.2 yuan. The company's Hong Kong-listed shares were up 30.43 percent at HK$24.00 at midday.

Kweichow Moutai rose 3.38 percent to 98.99 yuan after a senior executive said in a Reuters interview on Tuesday that the liquor maker continued to enjoy strong earnings growth which justified the rapid rise in its stock price. ($1 = 7.76 yuan)

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