Markets surge on incentive talks

China stocks posted their largest gains in more than a month yesterday, fueled by regulatory incentives to bolster the nation's capital market. Air and power sectors paced the rise.

The Shanghai Composite Index, which covers yuan-denominated A shares and foreign-currency B shares, surged 2.54 percent to 1,307.57.

The A-share Index jumped 2.54 percent to 1,372.81 while the B-share Index added 2.24 percent to 80.60.

The Shenzhen Composite Index, which tracks the smaller of the two stock markets, grew 2.75 percent to 330.93.

Both indexes boasted their biggest advances since November 11.

China's securities regulator pledged to promote infrastructure construction and launch more financial derivatives to empower the sluggish market, top officials said at a forum on Tuesday.

Shang Fulin, head of the regulator, together with three past chairmen, attended the Beijing conference.

He said the commission would intensify reform of the stock issuance system and encourage more large-capitalized blue chips to float on the domestic securities market.

"The chairman's remarks restored investors confidence and encouraged them to buy into domestic shares on optimism that the government will step up supporting the development of China's capital market," said Zhang Li, a Huatai Securities Co analyst.

"I expect the Shanghai index to jump 200 points in the next two to three months as market-boosting promises materialize."

China United Telecommunications Corp grew 2.36 percent to 3.04 yuan (36.63 US cents).

CITIC Securities Co closed at 6.25 yuan, up 3.14 percent.

The China Securities Regulatory Commission will continue to protect the interests of small investors while urging institutional investors to play major roles in the nation's securities market, Shang said.

The regulator also vowed to draft more relative rules and regulations to further prevent market risks after Shanghai and Shenzhen stock markets fell to five-year lows in September, amid a spate of scandals and malfeasance in listed firms and brokerages.

The airline sector paced the surge yesterday as crude-oil futures in New York fell for a second day, easing worry increasing jet fuel may cut earnings.

Oil closed at US$45.76 a barrel on the New York Mercantile Exchange, down 2 US cents from the previous day. It finished at US$46.28 a barrel on Friday, the highest since November 30.

China Southern Airlines Co advanced 4.82 percent to 5.00 yuan. China Eastern Airlines Corp finished at 4.24 yuan, up 2.91 percent. Shanghai Airlines Co added 3.49 percent to 6.52 yuan.

"The talk was part of government efforts to deliver on its promise of implementing the nine-point guideline issued by the State Council in February to stimulate China's capital market," said Wei Wei, a West China Securities Co analyst.

"Many institutional investors, such as pension funds and insurance companies, are expected to enter the stock market gradually in the years to come, hopefully bringing about more liquidity."

The market watchdog said it will gradually address the problems of a split share structure, which resulted from large amounts of non-tradable shares in China's listed firms.

The regulator will also strengthen control over new shares sales and set share prices in a more market-oriented way, Shang said.

Baoshan Iron & Steel Co rose 1.02 percent to 5.96 yuan while China Petroleum & Chemical Corp jumped 2.09 percent to 4.40 yuan.

Xinhua News Agency reported yesterday electricity prices may rise on increasing demand for coal, citing Zhou Dadi, director of the Energy Research Institute of the National Development and Reform Commission.

The news pushed up the power sector yesterday.

Shanghai Electric Power gained 2.64 percent to 7.39 yuan. China Yangtze Power Co added 1.60 percent to 8.90 yuan.

Source: Shanghai Daily News