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Share mania continues, stocks reach new high

(China Daily)
Updated: 2006-05-13 09:26

Chinese stocks continued their spectacular rise on Friday, with the main Shanghai index surging to a two-year high on institutional buying of large-capitalized shares.

The benchmark Shanghai Composite Index gained 4.3 per cent to end at 1,602.83, the highest closing level since May 12, 2004, when it settled at 1,603.77.

It was also the index's biggest one-day gain in nearly a year. The Shanghai index has risen 11.3 per cent this week.

The Shenzhen Composite Index rose 1.8 per cent to 389.75.

Shares in the energy sector saw the biggest rise at 6 per cent, and those in the automobile sector gained about 5 per cent.

China Petroleum & Chemical rose 9.5 per cent to 7.04 yuan (88 US cents), Huadian Power added 5.1 per cent to 3.09 yuan (38 US cents) and Chongqing Changan surged 5.9 per cent to 6.13 yuan (76 US cents).

However, shares in the property sector were flat as the government has promised to take steps to curb rising house price increases.

Fresh money continued to flow into the stock market on improved confidence and optimism over a resumption of share offerings after a year-long break for shareholding reforms.

"The resumption of share offerings reflects the regulator's confidence in the share reform, which has made great progress in the past year," said Kang Haoping, an analyst at United Securities.

Regulators have not yet said when initial public offerings, suspended since April 2005, will resume.

Since then, about 868 of some 1,400 companies with shares traded on the exchanges have announced plans to shift non-tradable, mostly government-held shares, into the market.

"As the market turns bullish, it is time for investors to recover from previous losses during the five-year bearish market," Cheng Weiqing, an analyst with CITIC Securities, said.

Despite Friday's rally, analysts said profit-taking pressure was mounting.

"It's difficult to say how far the market will go, but what I know is it's impossible for a market to keep rising without taking any breaks," said Simon Wang, an analyst at Xiangcai Securities.