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China stocks break through 4,000 points mark
www.chinanews.cn 2007-05-10 10:47:40
(Source: chinadaily)
May 10 - China's main stock index hit a fresh all-time high after
breaking a key barrier of 4,000 points due to the soaring blue chip
stocks as investors shrugged off official warnings of a possible market
bubble amid soaring corporate profits.
The benchmark Shanghai Composite Index, the most widely watched indicator
of the mainland's stock market, gained 1.60 percent to end at 4,013.08
points, breaching the psychologically important mark of 4,000 for the
first time.
That marks a gain of 50 percent so far this year on top of a 130 percent
rally in 2006.
Blue chip stocks showed strong performances. China Unicom, the nation's
second largest wireless operator, jumped its daily limit of 10 percent to
close at 6.35 yuan per share.
Bank of China rose 7.77 percent to 6.10 yuan, while Industrial and
Commercial Bank of China was up 5.47 percent to 5.78 yuan.
The surge came after the Shanghai Composite Index was pushed to a new
high in the previous session as new investor cash flooded in after the
week-long May Day market recess and China's yuan broke the barrier of
7.70 against the US dollar.
The consistent hitting of new highs since January was partly driven by
the wave of money brought in by new investors.
Some 4.787 million new A-share trading accounts were opened in April,
more than the combined number of the previous two years, statistics from
China Securities Depository and Clearing Corporation.
The figures for the new accounts are considered a rough indicator for the
number of new individual investors entering the market.
Analysts said the market may undergo drastic fluctation after the index
breaks the 4,000 point mark, as worries about stock overvaluations build
up.
The stocks in the Shanghai and Shenzhen markets are trading at more than
40 times earnings per share on average, much higher than developed
markets overseas.
The growing bubble in the country's stock market is a concern, said
central bank governor Zhou Xiaochuan last week, adding he would closely
monitor asset prices, the consumer price index and producer price index.
Zhou's remarks added to speculation there could be an interest rate hike
as early as next month.
Xie Guozhong, former chief China economist for Morgan Stanley, suggested
regulators should come up with certain policies to put the brakes on the
surging stock market for the good of long-term economic development and
social stability.
"China's equity market is starting to show signs of getting out of
control," said Zuo Xiaolei, chief economist of China Galaxy Securities in
China Securities Journal on Wednesday
The market rose even after the interest rate was hiked in March, and the
bank reserve ratio was raised in April, said Zuo.
"The neglect of policy and blindly pushing up the equity market fosters a
big market risk," he claimed.
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