CHINA/HK SHARES: A shares rally, flirt with 2,500 level

Making a Splash: Milk producer Bright Dairy jumped 10% today

CHINA SHARES got off to a flying start this week, closing up 2.11% with the benchmark Shanghai Composite finishing at 2,475.42, within sight of the psychologically significant 2,500 level.

Shares were boosted in part by a lower-than-expected June CPI figure.

Shares in Hong Kong did not share the enthusiasm of the mainland, with the Hang Seng Index skidding 0.79% today to 20,090.95.

Riding the crest of the buying wave today were five A-share listed firms, all halted from trade after rising by the daily 10% limit.

They were Shanghai-based Bright Dairy & Food Co Ltd (SHA:600597), Nanjing Textiles (SHA: 600250), sporting equipment maker HL Corp (SZA: 002105), optical tech and telecom firm Wuhan East Lake High Tech (SHA: 600133) and agriculture enterprise Zhengbang Tech (SZA: 002157).

	A-share lender Closing price (yuan) Monday rise Pudong Development 14.53 +2.69% China Merchants 14.01 +2.64% Bocom 6.21 +2.48% ICBC 4.19 +0.96% CCB 4.77 +0.85%

Analysts said the fact that these five biggest daily gainers were from disparate industries shows that sector-specific fundamentals were not at play today and investors were simply in a buying mood after a long string of mainly losing sessions.

Almost all counters began steadily rising in the afternoon session, with standouts more common in the resources, property, financial and steel sectors.

The buying sentiment today was spurred on by continuous selloffs over the past few weeks that left potential standout bargains after the dust had settled.

But analysts said a more immediate reason for the sudden bullishness today was further indication that economic regulators were in no hurry to expand restrictions on credit availability nor were they in any mood to make good on recent suggestions that new rules to prevent property speculation were to be implemented in the near term.

"Expectations of perhaps even less stringent macroeconomic controls going forward gave a big boost to sentiment today. Economic figures for June just out make the likelihood of even tighter credit in the third quarter quite remote,” said a Chinese language piece in SinaFinance.

It added that a lower-than-expected CPI for June, the chief barometer of inflation, cheered investors today who had previously been waiting on the sidelines looking for direction on credit availability going forward, and any imminent interest rate hike is now unlikely.

China's CPI rose 2.9% last month from a year earlier, slower than May's 3.1% rise. The rise in the producer price index (PPI) also slowed, up 6.4% in June versus May's 7.1% rise.

That the Central Bank would not likely be tightening credit in the country anytime soon also gave a boost to mainland banks today.

See earlier: CHINA SHARES: Which direction after 30% 1H fall?