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Shanghai firms rally on facelift

By Zhou Yan (China Daily)
Updated: 2009-03-27 07:44

Most of the Shanghai-based companies that were traded on the mainland bourses surged yesterday after the central government cleared a plan to develop the city as a major international financial and shipping center by 2020.

Related readings:  Shanghai aims at int'l financial and shipping center  Shanghai development program accelerated  China eyes Shanghai for economic boost  'Financial city' is taking shape

Only one out of the 128 shares in the Shanghai concept sector closed lower in yesterday's sessions, with nine shares soaring to their daily limits in heavy trading. The combined turnover of the shares of all Shanghai-based companies jumped 37 percent from Wednesday to 23.2 billion yuan.

Shanghai International Port Group (SIPG), the country's largest port operator, surged to its daily limit of 10.02 percent after the morning session started, and its turnover almost doubled from the day before to 721 million yesterday.

"SIPG will be one of the largest beneficiaries of the program in the long run, as the international shipping center will allocate more industry resources to the city, and more freight will transit through Shanghai port," said Qian Hongwei, a Shanghai-based analyst from CITIC China Securities.

But he said that the market has over-reacted to the news, and yesterday's abrupt advancement was only a brief run triggered by speculators.

"We still believe that SIPG will post very weak, or even negative earnings, given the slumping global demand," Qian said.

SIPG said it expects 2008 full year net profit to grow 26.76 percent to 4.6 billion yuan in its preliminary earnings report. Freight and container throughputs are expected to rise 4.53 percent and 7.09 percent respectively to 369 million tons and 280 million TEU.

Aijian Shares, a financial service company providing securities, trust, and foreign exchange services, also jumped 10.03 percent to its daily limit in yesterday's trading.

"The policy-aided program amid the Disneyland theme park speculation and the upcoming World Expo will attract more capital into the Shanghai concept sector, and will speed up mergers and acquisitions among listed companies based in the city," said Zhu Lixu, TX Investment Consulting Co.

Aijian's annual earnings were forecast to slide over 80 percent last year, according to its 2008 preliminary financial report. The company posted 365 million yuan net profit in 2007.

Shanghai's GDP growth slowed to 9.7 percent last year, the first time it went below 10 percent since 1992.

"We probably will see more priority policies coming up to benefit Shanghai, like using the yuan to settle international transactions, and lower taxation for the shipping industry. But the program will not have an instant effect on Shanghai concept stocks' earnings pending more detailed policies coming out amid the economic recovery," said Xu Wei, analyst, Guojin Securities.

"At present, the sector still lacks a persistent upward momentum, " Xu said.