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Chinese shares up 3.5% on prospect of new stimulus

(Xinhua)
Updated: 2009-01-14 15:30

After two days of losses, Chinese equities rebounded more than 3 percent Wednesday on anticipation of fresh economic stimulus policies from the government.

Analysts said investor confidence was buoyed by trade figures, which showed a decline in exports that wasn't as large as anticipated. These analysts said that macroeconomic policies, including four increases in export rebates in the second half, had limited the damage to exports.

Also, looser monetary policy had supported economic activity, as reflected in an expanded money supply in December and, in particular, increased corporate lending.

The Shanghai Composite Index gained 65.5 points, or 3.52 percent, to 1,928.87. The Shenzhen Component Index rose 4.3 percent to 6,811.87, up 281.06 points.

Combined turnover climbed to 97.2 billion yuan ($14.22 billion) from 80.33 billion yuan the previous trading day.

Gains overwhelmed declines on both markets, by 866 to 11 in Shanghai and 745 to nine in Shenzhen.

Wednesday's rally was led by shares in coal producers, banks and securities brokers.

Brokers rose the most on investor anticipation that an annual meeting of regulators, held Wednesday, would decide on new market-support measures.

Haitong Securities rose by almost the daily 10 percent limit to close at 9.82 yuan, up 9.97 percent. CITIC Securities soared 9.22 percent to 20.14 yuan.

Coal producers gained across the board on a rebound in global crude prices, as investors decided that stronger oil prices indicated rising demand for all forms of energy. Shanxi Lu'an Environmental Energy surged 10 percent to finish at 16.39 yuan. China Shenhua, the country's biggest coal miner, rose 4.25 percent to 19.15 yuan.

Banks also rose despite recent sales of stakes in such institutions as Bank of China (BOC) and China Construction Bank (CCB) by overseas lenders. Bank shares were supported by talk that China Investment Corp, the country's sovereign wealth fund, might buy shares of these banks.

BOC rose 2.4 percent to 2.99 yuan and CCB went up 2.99 percent to 3.79 yuan.

Auto producers rose for a second day on media reports that the State Council, or cabinet, was meeting Wednesday to discuss plans for the country's vehicle and steel industries. Steel producers also rose.

Baosteel, a leading steel producer, rose 3.43 percent to 5.13 yuan. Jinan Iron and Steel went up 4.56 percent to 5.04 yuan.

Hunan Changfeng Motors rose 3.97 percent to 6.03 yuan. Jiangling Motors gained 4.6 percent to 9.33 yuan.

South China Securities analysts wrote in a report that in the short run, the Chinese market would largely follow regional equity markets or react to new government policies.