Shares end up buoyed by easing inflation

Shares ended up 0.4 percent Friday, reversing morning losses, as news spread late in the session that the country's October inflation had eased sharply, sparking a buying spree in the airlines counter.

The benchmark Shanghai composite index, grouping foreign-currency B shares and yuan-denominated A shares, finished at 1,352.217 points after having fallen 0.2 percent by midday.

Consumer prices climbed 4.3 percent in the year through October, pulling back sharply to the slowest pace in six months, which economists said would reduce pressure to raise interest rates again soon, according to Shenzhen Daily.

The government raised interest rates for the first time in nine years last month in its latest step to cool a racing economy.

Analysts had said more rate hikes were likely in the near term and that would divert funds from stocks into bank savings.

"The unexpectedly sharp fall in inflation is a clear sign that government economic-cooling steps are taking hold," said Ren Chengde at Galaxy Securities.

"It will reduce the possibility of more rate cuts, and that's positive for the stock market."

Index heavyweight China Southern Airlines Co., the country's largest carrier by fleet size, was one of Friday's most active stocks.

Its yuan-denominated A shares, open to select foreign investors, jumped 4.2 percent to end at 4.68 yuan after passenger traffic jumped 11.4 percent on year in October, brightening prospects for 2004 earnings.

China Eastern Airlines, the second largest carrier, closed up 2.8 percent at 4.35 yuan after it recorded a rise in October passenger traffic of 11 percent on year.

Airline stocks were also helped by recent falls in global oil prices from their peak in late October, analysts said.

Hainan Airlines finished 3.3 percent higher at 3.77 yuan.

Despite Friday's gain, the benchmark index is still down 24 percent since early April, when the government's steps to cool economy first took hold.

Analysts said they expected the index to move between 1,300 and 1,400 next week as investors awaited fresh market leads.

The market witnessed its biggest rise Thursday on news that pension funds might be invested in the market.

Source: Shenzhen Daily/Agencies