Money

Equities get a lift from energy conservation steps

By Zhang Shidong (China Daily)
Updated: 2010-09-08 11:02

SHANGHAI - Mainland stocks rose to the highest in almost four months as speculation the government will curb overcapacity to meet energy efficiency targets fueled a rally for the nation's biggest metal producers.

Maanshan Iron & Steel Co jumped by the maximum 10 percent limit after JPMorgan Chase & Co said steel prices have "further upside" on policies to reduce energy consumption. Yunnan Aluminum Co rose the most in 11 months. The market's gains were limited as banks fell after Guosen Securities Co said regulators plan to impose loan-loss reserves on lenders.

"The government's plan to save energy will benefit big players in energy-consuming industries such as steel because it will weed out smaller rivals," said Wei Wei, an analyst at West China Securities Co in Shanghai.

Trade surplus not worrisome: Chen Related readings:  Equities gain ground, led by automakers  Automakers, commodity firms lead rally in mainland equities  Equities decline amid concern over property tightening  Consumer firms lead recovery in equities

The Shanghai Composite Index climbed in the last 15 minutes of trading, gaining 2.11, or 0.1 percent, to 2698.36 on Tuesday. It fell as much as 0.6 percent earlier. The CSI 300 Index added 0.3 percent to 2983.11.

A gauge of material producers rose 1.8 percent for the biggest gain among the 10 industry groups in the CSI 300 Index. The measure has rallied 11 percent over the past month, fueled by the prospect of industrial consolidation and speculation the nation's economic slowdown has peaked.

"The worst of China's economic slowdown has passed and inflation won't worsen," Wei Li, economist at Standard Chartered Bank (China) Ltd, said in an interview in Shanghai.

China will promote consolidation of companies in the automobile, cement, steel, machinery, rare earth and aluminum industries via mergers and acquisitions, the State Council said in a statement on Monday.

The rally for China's steelmakers and metal prices has "further upside" as the government introduces stricter policies to reduce energy consumption by the end of the year, according to JPMorgan Chase & Co.

Hong Kong stocks fluctuated as gains in steelmakers offset concern the Hang Seng Index's climb to a one-month high had overvalued earnings prospects. The Hang Seng Index advanced 0.22 percent to 21401.79 on Tuesday.