China shares rise on signs of official support
SHANGHAI (Reuters) - Chinese shares rose in heavy trade on Monday in response to continued signs that the government intended to support the market.
The benchmark Shanghai Composite Index .SSEC was up 0.81 percent at 3,723.151 points at midday, off a high of 3,754.374, extending a two-week-old rebound that has been encouraged by a cut in the stock trading tax.
Rising stocks in Shanghai outnumbered losers by 648 to 233, while turnover in Shanghai A shares was heavy at 82.9 billion yuan ($11.8 billion), up from 78.8 billion yuan on Wednesday morning, before the market closed for a long weekend.
The official Shanghai Securities News quoted officials at the China Securities Regulatory Commission on Monday as saying their studies showed pressure on the stock market was not that strong from follow-on share issues and institutions selling shares freed up by the expiry of lock-up periods.
Also, the Economic Observer newspaper reported at the weekend that CSRC chief Shang Fulin had urged institutional investors at a private meeting to help preserve market stability.
And the official Financial News quoted an unnamed regulatory official as saying that the government would encourage companies to rely more on their own money rather than on issuing additional shares to fund expansion.
"These are very clear signals that the government doesn't want the market to go down further, especially when the Olympic Games are nearing," said Wu Binghua, strategist at Debon Securities.
"If funds stop dumping stocks and investors feel much safer in buying, there will be little room for the index to fall further," Wu said, adding that he sees a floor around 3,000 points and expects the index to rebound to at least 4,000.
He said the Financial News report implied Ping An Insurance (601318.SS), which triggered panic in the market early this year by announcing a plan for an equity issue that could raise some $20 billion, might now not go ahead with the plan.
But how much the market rises beyond 4,000 points will depend on the economic outlook, Wu said. Chinese central bank governor Zhou Xiaochuan said in Switzerland on Sunday that inflation could fall in the second quarter, but that the full-year outlook remained uncertain.
Most real estate stocks rose on Monday on talk that China was unlikely to raise interest rates any time soon after the U.S. Federal Reserve's rate cut last week. Gemdale (600383.SS), a Shenzhen-based developer, jumped 6.42 percent to 14.42 yuan.
However, most banks fell. Industrial & Commercial Bank of China (601398.SS), the biggest lender, edged down 0.45 percent to 6.63 yuan.
The China Banking Regulatory Commission said in a report that liquidity management was becoming more difficult for Chinese banks, and that small and medium-sized banks faced an increasing risk of not being able to obtain enough liquidity, according to the China Securities Journal.
Sinolink Securities (600109.SS) resumed trading after being suspended on Wednesday and for part of Monday morning because of the death of Wei Dong, founder and chairman of the company's parent group. The stock dropped 3.07 percent to 48.58 yuan in very heavy trade.
The brokerage said its operations were continuing as normal and described the death in a brief statement as an "accident". Last week, a source familiar with the situation told Reuters that Wei had committed suicide, while Caijing magazine, a leading financial publication, reported that the death was a suicide and that Wei had been under investigation by government authorities. It did not specify the reason for the investigation.
Jiuzhitang Co 000989.SZ, a pharmaceutical manufacturer also controlled by Wei's group, fell 1.72 percent to 13.14 yuan.
Ningbo Fuda Co (600724.SS) jumped its 10 percent daily limit to 7.72 yuan after saying it would swap assets with its parent and issue as many as 1.2 billion new shares to the parent in order to obtain about 8 billion yuan worth of real estate assets.
($1 = 7.00 yuan)
(Editing by Andrew Torchia)
