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Mainland market slightly up on policy hopes

(China Daily/Agencies)
Updated: 2008-07-15 09:36

Mainland stocks rose slightly yesterday because of hopes that the government might loosen economic policy and support the market if necessary to preserve stability before and during next month's Beijing Olympics.

But analysts said an extended market rally was unlikely, as weak overseas stock markets, record crude oil prices and a slowing Chinese economy would continue to weigh on shares after the games.

Fortune SGAM Fund Management said in a report that long-term investors had begun returning to the market to buy stocks, but that high global oil prices and a shaky Chinese property market remained major worries.

"These two issues would need to be resolved for the stock market to enter a genuine rebound," it said, adding that it was not optimistic about the property market in the short term.

The benchmark Shanghai Composite Index, which surged 6.99 percent last week as it bounced from near 17-month lows, closed up 0.76 percent at 2878.256 points.

"Investors think there's a window of opportunity between now and the end of the Olympics," said Zhang Yang, strategist at Oriental Securities. "Stability is the government's priority during this period."

HK stock dropped

Hong Kong shares snapped a three-session winning streak to fall 0.8 percent yesterday, as some investors read the US government's proposed bailout of two troubled mortgage finance companies as a sign of deeper trouble in financial markets.

But Zijin Mining bucked the broad market trend to jump 5.3 percent as gold prices hovered near a four-month high and record high oil prices and waning US equities prompted investors to get into gold.

On Sunday, the US Treasury and Federal Reserve unveiled steps to shore up beleaguered mortgage financing giants Fannie Mae and Freddie Mac if needed, and head off a potential meltdown in global financial markets.

But as initial relief over the US government's support faded, some investors sold shares in HSBC Holdings, sending the stock nearly 2 percent lower.

"After the Fannie Mae, Fredie Mac bomb, investors expect other financial institutions to come out with their troubles and whether or not the government can help all of them is the key question now," said Peter Pak, vice president with BOCI Research.

Investors also fretted over Wall Street's reaction to the government's aid proposal announced at the weekend.

The Hang Seng Index closed 170.09 points lower at 22014.46 .