China Stock Index Breaches 4,000 Points: World's Biggest
Mover
By Zhang Shidong
May 28 (Bloomberg) -- China's CSI 300 Index rose above 4000 for the
first time, driven by a surge in new investors who are ignoring
warnings of a bubble to enter a market that's doubled this
year.
The value of shares traded on the Shanghai and Shenzhen stock
exchanges was a record $50.9 billion, exceeding the $43.9 billion
that changed hands on the New York Stock Exchange on May 25. U.S.
markets are shut today for the Memorial Day holiday.
``There is lots of liquidity flowing into the market,'' said Fan
Dizhao, who helps manage about $1.8 billion at Guotai Asset
Management Co. in Shanghai. ``Even fund mangers dare not sell their
shares at this stage, as no one knows when the rally will be
over.''
The CSI 300 climbed 87.33, or 2.2 percent, to close at 4072.58,
posting the biggest fluctuation among equity markets included in
global benchmarks. China International Marine Containers Co. and
Tsingtao Brewery Co. were among 11 stocks to rise by the 10 percent
daily limit.
Chinese investors opened more than 300,000 accounts a day last
week, even as former Federal Reserve Chairman Alan Greenspan called
the rally unsustainable and said the market may undergo a
``dramatic contraction.''
Trading in Shanghai's yuan-denominated A shares reached a record
251.8 billion yuan ($32.9 billion) today, surpassing the previous
high of 250.6 billion yuan set on May 9, according to data compiled
by Bloomberg. Turnover in Shenzhen's A shares amounted to 128.6
billion yuan, also a high.
New Accounts
China Petroleum, Asia's biggest oil refiner, also known as Sinopec,
jumped 0.67 yuan, or 5.4 percent, to 13.07. China International
Marine, the world's largest maker of freight containers, gained
3.17 yuan, or 10 percent, to 34.82. Baoshan Iron & Steel Co.,
China's biggest steelmaker, climbed 0.42 yuan, or 3.3 percent, to
13.12.
Households are shifting funds into the stock market, seeking better
returns than they can get on their bank deposits. The central
bank's benchmark one-year deposit rate, a ceiling for deposit rates
commercial banks can offer, is 3.06 percent, little more than the
nation's 3 percent inflation rate. The CSI 300 has risen 206
percent in the past year.
Investors opened 362,719 accounts at brokerages on May 24, the
fifth straight day the tally has exceeded 300,000, according to
figures on the China Depository & Clearing Corp.'s Web site. So
far this year, 20.9 million accounts have been opened, four times
the amount in 2006, the clearing house's data shows.
Li Ka-shing
``This kind of bubble is not driven by fundamentals; it's driven by
liquidity,'' said Agnes Deng, who helps manage $3.5 billion at
Standard Life Investments Asia in Hong Kong.
The CSI 300 is now valued at 46 times earnings, making mainland
stocks the most expensive among 14 Asia-Pacific markets tracked by
Bloomberg. Japan's Nikkei 225 Stock Average and India's Sensitive
Index command the next highest valuations, with each at about 23
times.
Greenspan last week joined central bank Governor Zhou Xiaochuan and
Asia's wealthiest man Li Ka-shing in warning of a bubble on China's
stock market. The index fell 0.5 percent the day after Greenspan's
comment. It resumed its gains the next day, closing 1.7 percent
higher.
The CSI 300, which tracks yuan-denominated A shares listed on
China's two exchanges, has climbed 14 percent since May 6, when the
central bank's Zhou said he was concerned about stock valuations.
It also rose to a record after billionaire Li on May 17 said the
market ``must be a bubble.''
The nation's Ministry of Education warned students not to get
involved in stock trading because they may be unable to bear their
losses if the investments turn sour, the official Xinhua News
Agency reported today. The stock regulator last week ordered
brokerages to make investors sign a declaration that they are aware
of the risks when opening stock-trading accounts.
Jiangxi Copper
The pace of gains on the stock market has increased speculation
that the government will announce further measures to cool the
market.
``Some investors simply keep buying shares, since there were no
crackdown measures by regulators,'' said Fan at Guotai Asset
Management.
Shares of copper producers found favor today as the price of the
metal jumped by the daily limit in Shanghai. Copper for August
delivery on the Shanghai Futures Exchange rose 3 percent to 63,650
yuan ($8,31
a metric
ton.
Jiangxi Copper Co., China's largest listed producer of the metal,
rose 2.26 yuan, or 9.3 percent, to 26.50. Anhui Tongdu Copper Stock
Co., the second biggest, climbed 1.65 yuan, or 10 percent, to
18.15. Yunnan Copper Industry Co. added 2.16 yuan, or 8.8 percent,
to 26.63.
Tsingtao, part-owned by Anheuser-Busch Cos., rose 2.15 yuan, or the
daily permitted 10 percent, to 23.62 yuan after Citigroup raised
its rating and price target for the company's Hong Kong- traded
stock. The brewer was raised to ``buy'' from ``sell'' by Citigroup
analyst Joye Qiao in a report published today.
Insurers Gain
China Life Insurance Co., the nation's biggest insurer, gained 1.17
yuan, or 3 percent, to 40.20. Ping An Insurance (Group) Co., the
second biggest, rose 2.56 yuan, or 4.1 percent, to 64.48.
Insurance companies have been approved in principal to invest in
real estate in China, the Shanghai Securities News said on May 26,
citing Zhou Daoxu, an official from the China Insurance Regulatory
Commission. There are no policy restrictions regarding real estate
investment by insurance companies, it said.
The Shanghai Composite Index, which tracks the bigger of China's
stock exchanges, gained 2.2 percent to 4272.11. The Shenzhen
Composite Index, which covers the smaller one, added 2.4 percent to
1264.05.
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