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Stocks soar on hopes of more stimulus

(China Daily/Agencies)
Updated: 2009-05-20 08:13

China's stocks rose, driving the benchmark index to its highest level in nine months, as financial companies advanced on optimism the government will increase spending to meet economic growth targets.

Shanghai Pudong Development Bank Co and Shenzhen Development Bank Co gained over 2 percent after an economic planning official said the government might introduce extra stimulus measures.

Related readings:  Chinese shares edge up after rebound by coal producers  Chinese shares rise slightly on Tuesday

"The government is quite determined to get a recovery," said Philippe Zhang, chief investment officer at AXA SPDB Investment Managers in Shanghai. "The market is still quite strong."

The Shanghai Composite Index rose 23.90, or 0.9 percent, to 2,676.68 at the close, the highest close since Aug 7. The CSI 300 Index added 1.1 percent to 2,840.08.

The Shanghai index has surged 57 percent from last year's low reached on Nov 4, spurred by the government's 4-trillion-yuan ($586 billion) stimulus package and removal of lending restrictions. Stocks traded on the measure are now valued at 26.9 times reported earnings, compared with 13.11 times in November last year and 48.7 times in October 2007.

"China can definitely reach its goal of economic growth of 8 percent this year as we have enough resources to add to government spending if needed," Xu Lin, director general at the National Development and Reform Commission's department of fiscal and financial affairs, said in Hong Kong.

Katherine Lu, director of China equity research at Oppenheimer & Co, said achieving that target would be "hard" as outbound shipments slump.

"Even though the economic stimulus is helping, export demand is still weak," Lu said in an interview in New York.

China's exports plunged a more-than-estimated 22.6 percent in April on collapsing demand in the US and Europe.

Hang Seng up 3.1%

Hong Kong stocks rose, lifting the benchmark index to a seven-month high.

"Sentiment has really changed," said Crystal Chan, head of investments at Legg Mason Hong Kong Asset Management. "Liquidity is still very strong. But it's not going to be a smooth rise at all. We'll still see bumpy numbers."

The Hang Seng Index added 521.12, or 3.1 percent, to 17,544.03, its highest close since Oct 3. The Hang Seng China Enterprises Index, which tracks H shares of companies from the mainland, advanced 2.9 percent to 10,072.51.