China's shares rose slightly yesterday in a technical rebound helped by gains in auto stocks, after a near-two-week slide sparked by worries about a government crackdown on improprieties in financial markets.
The benchmark Shanghai composite index, grouping hard currency B shares open to foreign investors and yuan-denominated A shares, finished 0.89 percent higher at 1,515.375 points, while the Shenzhen sub-index also gained 37.46 points or 1.15 percent to 3286.30.
Chongqing Changan Automobile Co, China's biggest minivan maker, was the most active B-share issue and rose 2.11 percent to HK$6.28 (US$0.805) on volume of 2.75 million shares.
On the A-share markets, index heavyweight Shanghai Automotive was one of the biggest gainers and most active counters, closing up 4.43 percent at 12.03 yuan (US$1.45).
Both stocks have doubled this year as Chinese investors have favored auto issues since late 2002 due to booming domestic demand for cars, brokers said.
"Despite Thursday's rebound, the potential for a continued climb is limited because of weak market fundamentals," said analyst Zhong Jingteng at Pingan Securities.
The composite index had fallen more than 4 percent since the start of last week as signs increased that the government was taking steps to crackdown on the illegal use of bank loans, which analysts said could squeeze liquidity.
Brokers said there were widespread fears fresh restrictions on investing in stocks might emerge from the crackdown, sparked partly by the probe into the dealings of Shanghai tycoon Zhou Zhengyi that started in late May.
"Investors are worried that the clampdown on the banking sector will spread to the stock markets," said analyst Hu Zhiguang at China Securities.
Yesterday, official newspapers quoted state auditor Li Jinhua as saying recent probes have unearthed problems at the China Construction Bank and Agricultural Development Bank and loans may have been used illegally for stock investments.
Shenzhen's B-share index rose 0.42 percent to 221.02 points and Shanghai's inched up 0.09 percent to 113.992.
But A shares in China Eastern Airlines fell 4.25 percent to 4.28 yuan as trade resumed after a day's halt on Wednesday, when the Chinese carrier warned it will post a first-half loss due to the outbreak of the SARS virus.
Investors ignored a China Eastern statement that it carried an average of 15,360 passengers a day in June, up nearly 200 percent from May at the height of the outbreak, brokers said.
China's yuan gained two notches to 8.2774 against the dollar yesterday after hitting its lowest close in a year, dealers said.
Wednesday's close was the lowest finish since the yuan ended at 8.2777 on June 26, 2002.
"There was little action in the market today," said a foreign bank dealer, adding there was no evidence of intervention by the central People's Bank of China.
Rising dollar demand was behind Wednesday's low, dealers said, a sign imports were picking up.
China's central bank has enforced a wafer-thin range of 8.2760 to 8.2800 for the yuan, which is not fully convertible on the capital account and whose movements are driven mainly by trade flows.
The yuan moved narrowly between 8.2774 and 8.2776 yesterday in thin turnover of US$520 million, although that was up from US$380 million on Wednesday.
It had moved near the firm end of the government-set range over the past two years, supported by persistent trade surpluses.
The central bank reaffirmed on Monday it will keep the exchange rate stable, shrugging off calls for a revaluation from countries like the United States, Japan and South Korea.
(China Daily June 27, 2003)
