Stocks News
- Shares jump to close 2006 up 130 percent
Date: 2-Jan-2007 Sources: (Shenzhen Daily)
THE stock market soared to an all-time high Friday, the last trading day of the year, as a flood of fresh investment funds boosted the benchmark index 4.2 percent and brought its gain for the full year to 130 percent.
Financial and airline companies surged on a sharp rise in the yuan's exchange rate, pushing China's benchmark index near the key 2700 level.
The Shanghai Composite Index, which groups both A and B shares, ended up 4.2 percent at 2675.47, its fifth straight record high.
The index, which hit an intraday high of 2698.90 Friday, has more than doubled since the beginning of the year, when it was at 1161.06. The mainland stock market will be shut between Monday and Wednesday for the New Year holiday.
The Shenzhen Composite Index rose 2.1 percent to 550.59.
The bull run may continue until the Lunar New Year, which falls in mid-February, with likely support from China Life Insurance's debut in Shanghai, expected by Jan. 11, analysts said.
Banks and airline companies rose Friday after the U.S. dollar-yuan central parity rate was set at a record low of 7.8087, compared with 7.8149 a day earlier.
A stronger yuan helps boost banks' asset value and eases airlines' repayment burden as many of them carry large dollar-denominated debt.
Air China rose 10 percent, the daily limit, to 5.15 yuan (US$0.66), China Southern Airlines also gained 10 percent, closing at 4.09 yuan, and Shanghai Airlines rose 8.5 percent to 3.56 yuan.
Of the banks, Bank of China (BOC) surged 9.9 percent to 5.43 yuan, and Industrial & Commercial Bank of China (ICBC) advanced 6 percent to 6.20 yuan. BOC has risen 36 percent last week and ICBC gained 31 percent over the same period, in part because of expectations over China Life's debut.
Analysts' forecasts for China Life's debut vary, but they generally said they believe the insurer will rise above 30 yuan in its first trading session, compared with the initial public offering (IPO) price of 18.88 yuan, on the company's growth prospects.
'More funds will likely seek financial stocks after China Life's listing, because their valuation will appear modest compared with China Life's,'said Major Teng, a senior strategist at Everbright Securities.
Even at its IPO price, China Life is valued at 97.8 times its 2005 earnings based on the firm's enlarged share capital, far exceeding about 40 times for the likes of BOC and ICBC.
Teng added that profit-taking could emerge in the coming weeks, though the market's long-term uptrend will remain intact.
But for the whole of 2007, the overall market could be volatile, with the benchmark index likely to hit the psychologically important 3000 level in the first quarter before falling back to 2000 on corrections, analysts said.
The timing of the first series of corrections, they said, will hinge on the timing of the launch of stock index futures.
'The earlier the index futures come, the sooner the market correction could emerge,'said Wu Ang, an analyst at CITIC Securities.
China plans to launch the derivatives early next year, China Securities Regulatory Commission Chairman Shang Fulin said.
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