Chinese share prices going up after week-long tumble

Chinese share prices closed higher on Tuesday after a week-long tumble as the benchmark Shanghai Composite Index moved up by 2.42 percent, or 63.16 points, to close at 2,675.70 points.

The index, which covers both A- and B-shares, bottomed at 2,541.53 points on a day with a turnover of 70.13 billion yuan (8.77 billion U.S. dollars).

The Shanghai A-Share index went up by 2.38 percent, or 65.20 points, to end at 2,809.24 points while the B-Share index was up 7.80 percent, or 12.43 points to finish at 171.84 points.

The component index of the smaller Shenzhen Stock Exchange rose 0.67 percent, or 48.58 points, to end at 7,341.53 points on a turnover of 31 billion yuan (3.9 billion U.S. dollars).

Huaxia Bank shares moved up by the maximum 10 percent to finish at 9.52 yuan.

The heavyweight Industrial and Commercial Bank of China gained 4.26 percent to close at 4.89 yuan, and China Life rose by 2.28 percent to 34.54 yuan.

The stock of the Bank of China edged up 4.30 percent to finish at 4.61 yuan.

The Industrial Bank, China's tenth largest commercial bank which made its debut on the Shanghai Stock Exchange on Monday, was also among the day's top gainers. The bank's share went up by 7.35 percent to 23.81 yuan.

Analysts warned investors of possible risks in the bullish stock market and suggested that investors should eschew heavyweights that moved up too sharply.

A survey of 20 mainstream Chinese securities research agencies and fund management firms shows that most of them are forecasting a bullish stock market in 2007.

The survey, carried out by the Orient Securities Research Institute, reflected the opinions of 11 securities research agencies such as China International Capital Corporation Limited, Guotai Jun'an Securities Research Institute and Shanghai Shenyin Wanguo Research and Consulting, and nine fund management firms such as Hua An Fund Management and Guangfa Fund Management

Seventeen of the 20 surveyed agencies and firms said that the A-Share market, buoyed by liquidity and the quality of listed firms, could still rise by about 30 percent.

They suggested that China was at the beginning of a long-term bullish stock market.

Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, warned last week that a bubble was developing in the stock market and people were investing irrationally.

Goldman Sachs does not agree that a "stock market bubble" has formed.

According to an economic analysis by Goldman Sachs, the bullish Chinese stock market is driven by comparatively low interest rates and an undervalued RMB.

The report says excessive liquidity is not in itself a problem but rather the high rate of return demanded by investors.

The reports says that the government should not take measures to cool down the market, but issue more securities to meet market demand.

Source: Xinhua