China's stock market surged 2.87 percent yesterday, despite an
interest rate hike of 27 basis points announced on Saturday.
The Shanghai Composite Index, the most widely watched indicator,
rose 84 points to close at 3,014. The smaller Shenzhen Component
Index climbed 1.59 percent to close at 8,276.8.
Analysts said yesterday's jump was mainly due to institutional
investors buying heavily weighted index constituent stocks,
especially those in the banking sector, to build up large holdings
in preparation for the introduction of index futures trading in
May. The Shanghai-Shenzhen 300 index, which underlies index
futures, went up 2.12 percent to close at 2,659.4.
The State Council released a new regulation on futures trading
on Friday, which will come into effect on April 15. Trading in
index futures is expected to begin at the beginning of May,
according to analysts.
"Many institutional investors rushed to bank and property
shares, which are the most heavily weighted on the
Shanghai-Shenzhen 300 index, including the Industrial and
Commercial Bank of China (ICBC) and Vanke A, before the
introduction of index futures," said Zhang Yidong, an analyst at
Industrial Securities.
But the interest rate hike had only minor impact on China's
stock market. The Shanghai Composite Index tumbled 2.6 percent at
the opening, but picked up quickly. "The interest rate hike was
already taken into account by the stock market before its
announcement," said Zhang.
"The announcement of the latest rate hike on Saturday removed a
nagging concern in the market," said Jing Ulrich, chairman of
JPMorgan China Equities.
Banking sector shares rose the most in yesterday's trade. The
Shanghai Pudong Development Bank soared 9.8 percent to close at
25.4. Bank of China surged 8.5 percent to close at 5.29, after
posting a net profit increase of 50 percent yesterday.
Other factors contributing to the surge in the banking sector
included profit growth and the interest rate hike. "Nearly all
banks saw net profit growth of over 30 percent in 2006," said Qian
Kun, an analyst at Changjiang Securities.
Gu Junlei, an analyst at Orient Securities, agreed. Gu said the
interest rate hike was likely to further widen banks' profit
margins.
Transport, electronic instruments and paper-making stocks also
performed well yesterday. Turnover on the Shanghai Stock Exchange
was 94.8 billion yuan.
(China Daily March 20, 2007)