Stocks News
- Banks drag stocks down after 7-day rise
Date: 8-Jan-2007 Sources: (Shenzhen Daily)
PROFIT-TAKING in banks dragged the domestic stock market lower Friday after seven days of gains, but the losses were capped by gains in laggards such as electricity producers.
The benchmark Shanghai Composite Index, which groups both A and B shares, closed down 2.7 percent at 2641.33.
Analysts said they expect the index to continue to consolidate this week, as profit-taking in the heavyweight banking sector will likely continue.
The Shenzhen Composite Index, which had lagged the benchmark index's gains in recent weeks, rose 1.5 percent to 562.23.
Among Friday's biggest decliners, Bank of China (BOC) was down 10 percent, the daily limit, at 5.07 yuan (US$0.65), and Industrial & Commercial Bank of China (ICBC) fell 9.9 percent to 5.45 yuan.
Turnover on both banks was large, indicating that many institutions are eager to reduce their holdings in the two banks after their recent gains, said Shi Honglin, an analyst at Everbright Securities.
Despite Friday's decline, BOC is still up 39 percent from the start of December, while ICBC is up 43 percent over the period.
'Although the banks may have some mild rebounds in the near term, they could still be risky investment options in the short term with their high valuations,'he said.
BOC was trading at 26 times its expected 2007 earnings of 0.194 yuan a share, while ICBC was trading at 27 times its expected 2007 earnings of 0.20 yuan a share, according to financial projections made by Wu Yonggang, an analyst at Guotai Junan Securities.
That compared with the about 20 times analysts generally say would be reasonable for heavyweight banks.
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