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Shanghai market hits three-year high

Xie Yu
Updated: Dec 3,2014 8:07 AM     China Daily

A week of cheer for a-shares.[Photo by Lu Qijian/For China Daily]

The Shanghai A-share market’s benchmark index staged its biggest one-day rise in 15 months on Dec 2.

After taking a breather on Dec 1, investors resumed a bull run based on expectations of a continued influx of new capital and a further easing of government monetary policy.

The Shanghai Composite Index rose by 3.1 percent on Tuesday to close at 2,763.55, a three-year high. Turnover was 397.2 billion yuan ($64.6 billion), down slightly from 401.1 billion yuan on Monday.

Banks, brokerages and insurance companies led the rally.

China Minsheng Banking Corp surged by 10 percent, while Haitong Securities Co rose by 9.2 percent and China Life Insurance Co was up by more than 8 percent.

Ping An Insurance (Group) Co’s Hong Kong-listed H-shares rose by 6.1 percent on market rumors that Alibaba Group Holding founder Jack Ma has agreed to take up part of the insurer’s share placement.

Chen Li, chief China equity strategist at UBS, said, “The market has been very active, and no doubt financials will benefit from the bullish sentiment generated by talk of further liquidity easing.”

Chen added that the average daily market turnover in the past two weeks has remained at levels two times those of the same period a year ago.

Analysts said the recent interest rate cut by the central bank has injected not only fresh liquidity, but also expectations of further monetary easing into the stock market.

Investors are betting that the People’s Bank of China will introduce more aggressive credit-easing measures, including a reduction in the bank reserve ratio, in coming months to stimulate economic growth in view of new data affirming a steeper economic downturn. The official Purchasing Managers Index dipped to 50.3 in November from 50.8 in October.

Chen said the increased stock market turnover is widely viewed as a boon to brokerage houses, and loosening credit can help to improve banks’ balance sheets through the reduction of bad debt.

“I believe the highly geared property sector will also benefit. We are very likely to see property shares catching up in the coming days.”

Xin Yu, president of Guangzhou-based Zequan Investment, said, “The continued high turnover shows that large amounts of fresh capital are flowing into this market. The bull run is far from ending.”

Investors are chasing bank shares that have underperformed the market for a long time in the past, Xin added. Mid- and small-cap stocks with outstanding performances in upcoming annual reports and which offer attractive dividends will also be hot favorites, he added.

The positive sentiment boosted Hong Kong’s Hang Seng China Enterprises Index by 2.8 percent at the close. The benchmark Hang Seng Index was up by 1.23 percent at the close.