China stock rally to resume after pause -J.P.Morgan

BEIJING Aug 12 (Reuters) - China's stock market will resume its rally after a short-term consolidation, providing buying opportunities in the ports, shipping and home appliance sectors, J.P. Morgan said on Wednesday.

Jing Ulrich, chairman of China Equities at the bank, said she was less enthusiastic about shares of property firms and banks that led the market's boom in the first half.

Shanghai's main stock index .SSEC fell 4.7 percent to its lowest close in four weeks on Wednesday on worries this year's market surge has outrun the recovery in the economy and that a sharp fall in new loans will mean less money available to flows into the stock market.

The index is still up 71 percent so far this year, making Shanghai the world's best performing major stock market.

"In the near term, I think the consolidation will last a little while longer, but all the factors for continued strong performance of the market are in the place," Ulrich told reporters.

Although companies in the exports, ports and shipping sectors, including China COSCO Holdings (1919.HK) (601919.SS), were still suffering losses due to weak external demand, they had potential to turn around over the rest of 2009, she said.

Home appliance makers should also benefit from strengthening property sales as well as rising household incomes, she added.

Ulrich ruled out a near-term policy tightening from Beijing, pending an export recovery and a pick-up in private investment.

"Given the uneven recovery, given the lack of corporate profitability, given the lacklustre investment by the private businesses, I think the government will hold off any major tightening," she said.

Ulrich expects China to let red chips such as China Mobile (0941.HK) and Lenovo (0992.HK) to list in the mainland within six months and foreign firms within 12 months.

About a dozen major "red-chip" firms, those headquartered in China but listed in Hong Kong, are keen to list in Shanghai, according to bankers.

China agreed in May to let qualified foreign firms list on domestic stock exchanges by issuing shares or depository receipts as part of efforts to open up its capital markets.

HSBC Holdings Plc (HSBA.L), Europe's biggest bank, has hired two Chinese underwriters for its planned China listing, its Asia Pacific chairman told Reuters last week. [ID:nSHA203886] (Reporting by Langi Chiang and Alan Wheatley; Editing by Anshuman Daga)