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Shares rebound 2% amid cautious buying

By Ding Qi (chinadaily.com.cn)
Updated: 2008-08-29 17:40

Domestic stock markets wound up August's trading by bouncing more than two percent, but investors remained cautious awaiting substantial market-stabilizing policies from the financial authority.

Boosted by the overnight oil price drop and Wall Street gains, the benchmark Shanghai Composite Index opened 11 points higher at 2,361.05. Although a wait-and-see attitude again dominated the market during morning trading, the index gained more strength from the rallying property and the energy sector in the afternoon. It closed up 47 points or 2.01 percent at 2,397.37, the biggest daily rise in a week.

The smaller Shenzhen market also saw a gain Friday as the Shenzhen Component Index rose 2.39 percent to 8,004.24 points.

Combined turnover of the two markets expanded to 56.77 billion yuan ($8.28 billion) thanks to fortified buying force in the afternoon, but the volume remained close to the lowest level of the year.

In the broad-based rebound, 1,462 stocks in both markets closed higher, accounting for 90 percent of the total.

Financials and the real estate sector performed stronger after months of share price declines under a tightening monetary policy. The Capital Development Co, a Beijing based property developer, surged to the daily limit of 10 percent at 8.45 yuan, while The Pacific Securities led the financial sector with a 9.98 percent gain to 16.09 yuan. Both stocks have lost more than 50 percent of market value since the beginning of 2008.

Large-cap blue chips also performed well. Baoshan Iron & Steel Co Ltd, China's top steel producer, climbed 3.82 percent to 6.52 yuan after issuing a steady half-year result today. The steel giant pocketed 9.65 billion yuan in the first six months, up 18.2 percent from a year earlier despite increased raw material costs.

In recent days, securities regulators continue making positive comments and moves to support the healthy development of the market. Meanwhile, shares have suffered excessive sellout in the short term without major changes in earning prospects, which may suggest a rebound in September, according to Wang Qiang, a stock analyst from the Shanghai-based Tebon Securities.

Statistics released by TX Investment Consulting Co today show the country's 364 mutual funds suffered record losses totaling 1.08 trillion yuan in the first half affected by the share slump. As of December 31, 2007, there was more than one trillion yuan of surplus in mutual funds' accounts.

Officials from the China Securities Regulatory Commission said recently it was communicating with other government departments on scraping the tax imposed on listed-companies' dividends. The suggestion aimed to encourage a value-oriented investment idea among domestic stock buyers, but it is unclear when or how such supporting measures will be rolled out.