SHANGHAI: China's main stock index surged over 3 percent on Wednesday,
led by financials and oil firms, as the market bounced from technical
support and fund managers said regulators had asked some funds not to
dump shares. The Shanghai Composite Index fell as much as 1.84 percent
in early trade but was up 3.08 percent at 3,244.856 points at midday,
less than 4 points from its intra-day high. Rising stocks in Shanghai
overwhelmed losers by 806 to 73.
Turnover in Shanghai A shares was moderate at 40.3 billion yuan but
was up from Tuesday morning's 25.48 billion. On Tuesday the index
dipped below 3,000 points for the first time in 13 months, nearing
major chart support at 2,956, the 61.8 percent retracement of its bull
run from mid-2005. With the index down nearly 50 percent from last
October's peak, and the average premium of domestically listed A
shares over Hong Kong-listed H shares in Chinese companies down to
near 30 percent, many analysts said blue-chip valuations made a market
rebound possible.
But with consumer price inflation near 11-year highs and a possible
economic slowdown looming in the second half of this year, they said
it remained unclear whether the market was starting any extended
recovery. "It's natural for the market to rebound near 3,000 points,
which many see as a psychologically important level," said Gao
Lingzhi, strategist at Great Wall Securities. "But the rebound won't
last unless the economy shows clear signs of improving."
The index faces initial technical resistance on its 20-day average,
now at 3,377 points, which halted a rally in early April. The charts
suggest an extended recovery might test the 4,000-point area, the 38.2
percent retracement of the market's slide from mid-January. Two fund
managers, who declined to be identified, said the China Securities
Regulatory Commission had again asked some fund management firms not
to cut their equities holdings. This fuelled talk that the index might
finally be finding a bottom around 3,000 points, as any clean break
below that level would trigger further action by regulators to rescue
the market.
Source : Economic Times
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