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Stocks break record as optimism abounds

(Shanghai Daily)
Updated: 2006-12-15 11:30

Shanghai stocks hit an all-time high yesterday, fueled by optimism that China-listed companies will benefit from sustained economic growth and a stronger yuan.

Traders predicted the market will climb even further by the year's end on the back of continuing bullish sentiment and a massive cash infusion from equity funds.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B chips, closed at 2,249.11, up 1.15 percent for the day and 4.11 points above the previous record, set in June 2001.

That high-water mark was followed by a four-year slump. The market benchmark nosedived below 1,000 last summer, hitting eight-year lows.

A man is seen beside an electronic board at a stock exchange in Nanjing, east China's Jiangsu province December 14, 2006. China's benchmark stock index rose 0.99 percent to an all-time high on Thursday, boosted by big new inflows of funds into the market from local and foreign investors. The Chinese characters on the electronic board read "Be careful to access stock market since it is of risk". [Reuters]

The index has almost doubled so far this year, driven by the strong performance of blue chips.

A total 720 of the 900-odd Shanghai-listed firms advanced yesterday.

Transaction volume reached 37.9 billion yuan (US$4.85 billion), compared with 37 billion yuan on Wednesday.

"It (the new high) has been expected," said Zhu Yemin, a Galaxy Securities Co trader. "I don't believe the index has reached its peak as funds are eager to enter the market."

Money managers collected nearly 140 billion yuan by selling shares in mutual funds, which mainly trade stocks and bonds, in the July-November period, boosting the scale of equity-investment funds by a third, according to regulatory data.

The mutual funds held securities worth nearly 360 billion yuan at the end of last month, up 110 percent from the start of the year, the regulator said.

"The funds' frenzy for securities will continue this month," said Wu Zhiguo, a Guohai Securities Co analyst.

China's yuan closed yesterday at a record 7.8185 to the dollar, appreciating 5.6 percent overall since its July 2005 revaluation.

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