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Market climbs despite rate rise
By Jin Jing (China Daily)
Updated: 2007-09-18 10:54
The stock market jumped 2.06 percent yesterday despite the government announcing it would raise the interest rate by 0.27 of a percentage point on Friday. The benchmark one-year lending rate was raised 27 basis points to 7.29 percent, and the one-year deposit rate by 27 basis points to 3.87 percent from last Saturday. It's the fifth time this year that the People's Bank of China has raised the key policy rates. Analysts said the interest rate rise was within expectations after the consumer price index (CPI) jumped 6.5 percent in August. Stocks plunged 4.5 percent on anticipation of a rate rise when the CPI figure was announced last Tuesday, said analysts. The Shanghai Composite Index rose 109.2 points to close at 5421.39 yesterday, with 710 out of 903 stocks closing higher. It's the first time the indicator has held firm over the barrier of 5400 points at the close. Turnover on the Shanghai bourse amounted to 167.12 billion yuan yesterday. The smaller Shenzhen Composite Index also climbed 1.99 percent to close at 1512.3, and the foreign currency denominated B-share index jumped 2.13 percent to close at 358.9 points. The number of new A-share accounts opened on Friday dipped slightly to 185,424, compared with the daily average of 205,400 a week ago. "The interest rate hike is milder than expected because of the much higher CPI number," said Wu Feng, an analyst at TX Investment Consulting Co ltd. "China Construction Bank began its subscription of 9 billion A shares for its Shanghai IPO today, which are expected to divert chunks of capital from the stock market. But today's bull run showed there is plentiful liquidity in the market," Zhu Haibin, an analyst at Essence Securities, said yesterday. Companies in the aviation sector led the increase yesterday. China Eastern Airlines has soared 99 percent since it resumed trading on September 3. Shanghai Airlines rose 7.9 percent to close at 18.46 yuan yesterday. "The aviation industry has benefited from the currency appreciation and it has not risen much this year," said Zhu. Companies in the steel sector also performed well. Handan Steel soared to the daily limit to close at 9.66 yuan. Baotou Steel also surged 9.96 percent to close at 9.94 yuan. "Most steel stocks have a relatively lower price-earnings ratio. The steel companies were boosted by anticipation of rising steel prices and industry consolidation," said Wu. (For more biz stories, please visit Industries)
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