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Nearly all Chinese shares shot up their daily limit in heavy trading on Monday as punters cheered the central government's determination to push up the markets by abolishing a controversial State share selldown scheme.
Shanghai's composite index ascended 144.591 points, or 9.25 per cent, to 1,707.313, while Shenzhen's sub-index gained 297.18 points, or 9.34 per cent, to closed at 3,478.12.
Punters scooped up practically any share they could lay their hands on. Shanghai's B-share index edged up 9.67 per cent at 155.443 points while Shenzhen's increased by 9.73 per cent to end at 241.78.
Turnover on the B-share market, open to foreign and Chinese investors, jumped to a strong US$199.078 million in Shanghai and US$102.778 in Shenzhen - levels not seen since September.
"A series of government policies to support the markets, in particular the halt of State share selling, has led to a turning point of the stock market trend," said Zheng Weigang, a senior analyst at Shanghai Finance Securities. "It has swept away prolonged weakness over the past year, and steady rises are expected in the near term."
The government said on Sunday it had decided to end the plan to sell down State holdings in listed firms, which account for more than half of a stock market capitalized at US$500 billion and rivaling Hong Kong as the second largest in Asia.
Investors also took heart from another decisive regulatory move announced over the weekend intended to further allay liquidity fears by limiting the pace of additional sales of domestic A shares, which are off limits to foreigners.
"The rise yesterday was supported by a series of supportive policies," said analyst Zhan Yibing of Guotong Securities. "Heavy volumes indicated that the rebound from the downtrend of the past year would continue."
Investors, expecting further gains in the near term, bought B shares indiscriminately on Monday, brokers said.
With the exception of two counters suspended from trade, nearly all other B shares closed up their 10 per cent daily limit - with some loss-making firms among the most actively traded.
Chicken breeder Shanghai Dajiang Group Co, which posted net losses for 2000 and 2001 under international accounting standards, was the most active stock, finishing limit-up at US$0.640 with 23 million shares changing hands.
Chinese punters typically speculate in chronic loss-making companies in hopes of a dramatic reversal of fortune due to government-orchestrated corporate asset restructurings.
The State share selldown plan announced in June last year was designed to replenish China's underfunded social welfare system, but investors feared a flood of new shares would dry up liquidity and hurt prices.
The government is now saying the complicated plan would require lengthy study before regulators could devise a comprehensive plan widely accepted by the markets and that it had other ways to raise money for social welfare system.
Analysts said they expected share indices to keep rising over the next few weeks, with the benchmark Shanghai composite index likely to surpass 1,800 points and possibly testing the key 2,000-point support.
But they also said it was unlikely the composite index would recover soon to its peak of 2,245.435 set on June 14, 2001, partly due to a crackdown on market corruption.
Before Monday's surge, China's share indices had fallen more than 30 per cent since June 2001 due to a slew of negative factors including the selldown plan and the crackdown.
(China Daily June 25, 2002)
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