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Shanghai index hits new high, 04/23

By Zhang Ran (China Daily)
Updated: 2007-04-24 08:54

China's major stock index soared by 3.53 percent on Monday to close at a record high of 3,710.886 points, as fears of an interest rate hike eased after jolting the market on Thursday.

Blue chips, steel and coal stocks led the rise, with 828 gainers outnumbering the 57 losers.

Analysts said the Shanghai Composite Index, the market's major index, is likely to reach 4,000 points before it plummets in another correction.

"The index could jump to 4,000 points around the May Day holiday," said Zhao Jianxing, an analyst at Shenzhen-based China Merchants Securities.

Wu Yonggang, an analyst at Guotai Junan Securities, agreed. Wu said blue chips including bank shares will lead market growth as they fell behind in the last round of rises.

"CITIC Bank's listing in Shanghai, which raised 13.3 billion yuan, will help propel a surge in the banking sector," Wu said.

Yesterday's exuberant growth came after Thursday's plummet, which saw the index drop 4.52 percent after March inflation rose to 3.3 percent from February's 2.7 percent, threatening to prompt another interest rate hike and triggering a wave of profit-taking.

"Macroeconomic control including a possible interest rate hike is healthy and should not be seen as a threat," Zhao said. "In fact, bigger surges will come after a correction."

Many analysts like Zhao believe a rate hike would have little impact on corporate earnings or the economy, and would not deter stock investors especially with huge sums of money being raised by new mutual funds.

The China Securities Depository and Clearing Corp Ltd said 317,200 new accounts were opened on Friday, including 258,188 A-share accounts and 57,369 fund accounts a strong signal that market setbacks are not scaring investors away.

But analysts warned that the market's refusal to undergo a major downward correction in the short term meant its eventual pullback would be larger.

Meanwhile, the overheating mainland market is luring individual investors from abroad.