SHANGHAI (Dow Jones)--China shares ended higher for a second straight day Tuesday on expectations that Beijing will reveal further stimulus measures to boost domestic growth, with construction-related stocks and auto makers leading gains.
The benchmark Shanghai Composite Index gained 1.2% to 2388.64 points, finishing near the high of the session, while the Shenzhen Composite Index rose 1.5% to 962.85.
"In the short term, the Shanghai index may push above 2400 and even test the market's high for the year," said Wang Bo, an analyst at China Minzu Securities. The Shanghai index hit a high of 2478.38 on Feb. 27.
"Investors can find opportunities in sectors like railroads, airlines, cars, water conservation, green energy, cement and heavy metals," Wang said. "These are all areas that will get a boost in corporate profit as Beijing rolls out sector-specific stimulus projects here."
Construction-related stocks gained as China has significantly accelerated approvals for new investment projects by companies and local governments. The investment projects approved by the National Development and Reform Commission in April cover everything from new steel mills to hospitals and water treatment plants. In just the last week, the NDRC approved two major new steel plants, with investment sizes of $9.5 billion and $11 billion. Meanwhile, the Ministry of Railways has said it will call for private investment in the railway market.
Among the top infrastructure gainers of the day, China Railway Erju jumped 5.6% to CNY8.52 following a surge to the 10% daily limit yesterday. Tengda Construction Group climbed 9.0% to CNY3.52 while China Gezhouba Group ended up 1.2% at CNY7.67.
Auto makers rose after the state-run Shanghai Securities News reported that China will soon introduce stimulus measures to revive demand for automobiles. The report said the measures could include providing cash subsidies to residents of rural areas who purchase smaller cars and encouraging the replacement of certain types of older vehicles.
Jianghuai Automobile jumped 4.1% to CNY6.66, Great Wall Motor climbed 6.4% to CNY17.37 and Changan Automobile gained 1.9% to CNY5.48.
Despite a two-day rebound in the broader market, some analysts questioned the sustainability of the rise. Market heavyweights in the financial sector have only seen moderate gains, suggesting that in the short term, investors are still anxious about growth prospects in the broader global context.
Pei Xiaoyan, an analyst at United Securities, said that the market could consolidate until June, when Greece's fate in the eurozone will become more certain following the country's elections. Some investors are even waiting until August or September for signs that the domestic economic recovery is picking up. "Only then will sentiment start to turn optimistic," he said.
Bank stocks were moderately higher Tuesday, with China Construction Bank up 0.7% at CNY4.53, ICBC up 0.7% at CNY4.53 and Bank of China ahead 0.3% to CNY3.03.
-By Chao Deng, Dow Jones Newswires; 86-21-6120-1200; chao.deng@dowjones.com
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