CHINA SHARES Again Flirting With 3,000 As Index Jumps Nearly 3%

Lenders across China, including this ABC branch in Shanghai, were recently asked to boost their reserves, but interest rates were held steady. Photo: Leong Chan Teik

CHINA’S A SHARES got off to a strong start this week, ending Monday trade up 2.9% at 2,922.95 on solid showings from coal and construction stocks.

Meanwhile, Hong Kong’s Hang Seng Index finished up 0.67% at 23,317.61.

The market was noticeably buoyant on central bank inaction.

The People’s Bank of China on Friday ordered lenders to raise their reserve ratios by half a percentage point but did not go a step further and raise key interest rates.

The lack of rate action came as somewhat of a surprise to investors given the announcement over the weekend that November’s consumer price index (CPI), the benchmark inflation gauge, rose 5.1% year-on-year, hitting the highest level in over two years, far above the 4.6% consensus forecast from market watchers.

The raft of economic data also revealed that the country’s producer price index (PPI) leaped 6.1% from a year earlier, also higher than expected.

Meanwhile, China’s industrial production in November rose 13.3% and retail sales grew 18.7%, while urban fixed asset investment in the January-November period climbed 24.9% from the year-earlier period.

Despite the reluctance of the central bank to hike interest rates this time around to combat inflation, analysts cited by media are of a mind that rate hikes could be a frequent phenomenon in the months ahead as national leaders have recently stressed the need for more stable prices in the country.

Over the past five trading days, the benchmark Shanghai Composite Index has risen 2.31%, absorbing CPI, PPI and RRR moves in the process.

Thanks to the temporary respite on rate action, major capital-intensive industries saw some of the biggest gains today including coal, construction, shipbuilding and cement.

Jiangxi Wannianqing Cement Co Ltd (SZA: 000789) was up 7.4% at 11.90 yuan, Anhui Conch Cement Co Ltd (SHA: 600585) rose 5.95% to 29.58, Xinjiang Tianshan Cement Co Ltd (SZA: 000877) added 5.4% to 28.67, Xishui Strong Year (SHA: 600291) was 3.4% higher at 11.55, and Tangshan Jidong Cement Company Limited (SZA: 000401) was up 3.65% at 23.54.

Railway sector firms continued to thrive on the steady lending rates and a constant drumbeat of support from Beijing about the importance of the industry to the country’s development.

Jinxi Axle Co Ltd (SHA: 600495) rose its daily upside limit of 10%, closing at 16.72 yuan, as did Taiyuan Heavy Industry (SHA: 600169), finishing at 21.71.

TGood Electric (SZA: 300001) added 7.43% to 41.91 yuan, Gem-Year Industrial Co Ltd (SHA: 601002) surged 9.67% to 14.52 and China Northern Locomotive & Rolling Stock Industry (Group) Corp (SHA: 601299) rose 4.30% to 7.27.

Coal firms, who provide for the vast bulk of the country’s electricity fuelstock, had an extremely strong trading day, as the sector continues to benefit from higher selling prices for the commodity.

Taiyuan Coal Gasification Co Ltd (SZA: 000968) and Guoyang New Energy (SHA: 600348) both rose their daily 10% limits.

Metal firms also took off today, with Jiangxi Copper (SHA: 600362), Jilin Liyuan Aluminum (SZA: 002501) and Suzhou Dongshan Precision Manufacturing Co Ltd (SZA: 002384) all up by their daily 10% limits.

See previous:

CHINA SHARES Higher On Crude Prices, But Property Lags