The mainland stock market jumped 4.59 percent yesterday, boosted by the positive remarks from a top government official, which eased investor concerns over a tightening of macroeconomic control.
The benchmark Shanghai Composite Index rose 122.51 points to close at 2792.4, with 873 out of 911 stocks closing higher. The Shenzhen Component Index surged 5.34 percent, or 502.25 points to close at 9902.98.
The turnover on the two bourses amounted to 122.27 billion yuan, up 30.7 percent from last Friday. The total capitalization recovered 4.7 percent to 18.23 trillion yuan.
Analysts said that the recent remarks from Premier Wen Jiabao eased investor concerns over tighter controls.
Wen said the country would maintain the fast and steady pace of economic development, and urged the government to improve macroeconomic controls further and optimize the economic structure to avoid serious fluctuations in the economy.
A report from JPMorgan said the risk of near-term interest rate hike was very low as China has been suffering from huge hot money inflows. "Most of the rate normalization should happen in 2009 rather than anytime soon, with the scope of renminbi rate increases less than the dollar, in order to close the renminbi-dollar interest rate gap to discourage hot money inflows," the report said.
"To the extent that the central bank moves to use market-oriented policy tools, it would likely rely less on administrative measures such as credit control," said the report.
In addition, "heavy buying appeared as the index fell approaching 2500 points, where most stocks were undervalued, such as banks," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
The valuation of A-share companies has slid to under 20 earnings per share, after the major index fell by nearly 50 percent this year.
Many analysts expect the corporate earnings growth of listed companies to be better than previous expectations of less than 20 percent this year. Listed companies are due to release their half-year corporate earnings report to the Shanghai and Shenzhen bourses beginning from mid-July.
Several companies reported the estimated earnings growth of above 100 percent yesterday. China Merchants Bank surged 6.48 percent after it reported an estimated net profit growth of over 100 percent in the first half. China CITIC Bank soared 7.27 percent following net profit increase of 150 percent.
"The overall bank earnings growth is expected to be 74 percent in the first half, slightly above the market's previous expectation," said Yuan Lin, an analyst at BOC International.
The high expectations for steel companies' earnings led the steelmakers to surge yesterday. Baosteel jumped 8.34 percent.
Source: China Daily
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