|A stock investor monitors the changes of stock and fund
indexes at a securities trading office in Beijing November 20, 2006.
The Shanghai stock index rose as high as 2,000 points, a 63-month
A continuing massive inflow of domestic and foreign funds Tuesday
pushed the Shanghai stock index to a 5-year high with much of the buying
concentrated in banks and blue
The benchmark Shanghai
Composite Index, which had seen five consecutive days of gains, breached
the 2000-point psychological barrier and jumped 2.3 per cent to close at
2017.28, the highest since July 27, 2001.
The index is up about 72 per cent since the beginning of this year,
making China one of the world's best-performing equities markets.
The rally gathered steam after the government initiated regulatory and
structural reforms to convert US$250 billion worth of State-owned
non-tradable shares to tradable ones.
The market surge is also a reflection of China's fast-growing economy
and wide expectations of the yuan's further appreciation .
These factors have combined to suck in a continuous inflow of
investment funds from institutions, analysts said.
The exchange rate of the renminbi against the US dollar hit a new high
last Monday, with the central parity
rate at 7.8644. The rate was 7.869 yesterday.
Figures from Shanghai-based Wind Data show that since September, 22
mutual funds have raised 80.6 billion yuan (US$10.2 billion) to invest in
In the past two weeks alone, eight mutual funds raised a combined 30
billion yuan (US$3.8 billion), indicating a new wave of capital for
It predicted that by the end of this year, more than 100 billion yuan
of (US$12.7 billion) new capital would flow into the market.
Meanwhile, the central government has quickened the pace of allowing
more foreign capital into the stock market. The government granted US$400
million in new quotas in the past week to qualified foreign institutional
investors (QFIIs), bringing the overall quota to US$8.645 billion.
"Those new funds are mainly invested in bank shares and other blue
chips, which have steady and continual growing potential," said Zhang Qi,
an analyst with Haitong Securities.
China Merchants Bank, which gained 1.1 per cent on Friday, jumped 6.6
per cent to 13.50 yuan (US$1.7). Industrial & Commercial Bank of
China, the country's largest lender, climbed 3.2 per cent to 3.92 yuan
(49.6 US cents) after gaining 9.8 per cent last week.
Another heavyweight blue chip, Sinopec Corp, Asia's largest oil
refiner, surged 7.8 per cent to 7.87 yuan (99.6 US cents) following Nymex
crude's fall to a 17-month low at Friday's close.
Zhang Yichi, who manages a mutual stock fund that sold out within two
days, believes the market would remain bullish next month. He predicted
that the return for mutual fund investors next year will reach up to 25 to
30 per cent.
The market capitalization of the Shanghai Stock Exchange crossed 5,000
billion yuan (US$633 billion) on November 15.