Sunday, July 26, 2009

China's Stocks Rise, Sichuan Expressway Races Ahead

. Sunday, July 26, 2009

By stockOzone team

Hong Kong and China shares rose on Monday in a liquidity bounce as investors continued to bet on a speedy recovery in the Chinese economy, while the Shanghai exchange's first new listing in nearly a year made an impressive debut.

China's Sichuan Expressway (601107.SS) soared 175 percent from its IPO price in its market debut to 9.89 yuan, triggering a suspension of trade. The shares were buoyed by the company's strong growth prospects and a relatively low IPO price, although analysts warned of excessive speculation in the stock. [ID:nSHA182814]

The stock (0107.HK) rose 3.5 percent to HK$3.53 in Hong Kong.

Local-currency A shares in the toll road operator kicked off trading at 7.60 yuan, up from the IPO price of 3.60 yuan, giving its A shares a dramatic 153 percent premium over the HK$3.41 closing price for its Hong Kong-listed H shares on Friday.

Here are the index moves and top stock moves by midday-

* The benchmark Hang Seng Index .HSI was up 1.3 percent at 20,246.22 with shares worth HK$45.5 billion changing hands.

The index rose to 20,385.69 earlier in the session, its highest level since September 9 last year.

* Property stocks surged, with home sales and prices continuing to climb as demand picks up pace in the low interest rate environment while supply remains tight. Conglomerate New World Development (0017.HK) advanced 4.6 percent while Henderson Land (0012.HK) was up 4.1 percent.

"Hong Kong's main difference from any other property market in the world is its very low supply. This sets the base for a very strong rebound as the economy rebounds and liquidity seeps back into the system," said Eric Wong, analyst with UBS.

UBS raised its property price forecasts across the board, estimating a 32 percent increase in home prices between June 2009 to December 2010.

* The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, was 1.7 percent higher at 12,189.56.

* China Shenhua Energy (1088.HK) extended Friday's gains to pile on 5.7 percent following strong power output data last week, which bodes well for coal demand.

China's power output in mid-July via major grids rose 7.9 percent on year, lifted by hotter-than-usual weather and a revival in demand on a continued economic rebound, the official Shanghai Securities News reported on Friday.

Power plant equipment maker Harbin Power (1133.HK) rose 5.6 percent while Shanghai Electric (2727.HK) jumped 3.6 percent.

* Macau's casino stocks gained on Monday after the gambling haven chose a new chief executive over the weekend, with no chnages expected to gaming policy. [ID:nSP392982]

Galaxy Entertainment (0027.HK) rose 2.2 percent, while casino tycoon Stanley Ho's SJM Holdings (0880.HK) tacked on 1.6 percent.

* Aluminum Corp of China (Chalco) (2600.HK) reversed course, from early step losses, to gain 3.2 percent as investors shrugged off a warning from the world's No.3 alumina producer of a loss in the first half of 2009 on low aluminum demand and prices.

Analysts said much of the bad news had been factored into Chalco's share price after its dramatic plunge last year. The stock, which fell 74 percent last year, has clawed back 127 percent so far in 2009. The stock rose to HK$9.35 by mid-morning after dropping to HK$8.49 earlier.

* The Shanghai Composite Index .SSEC ended the morning up 1.16 percent at 3,411.615 after hitting a new 13-month intraday high.

* Gaining Shanghai A shares outnumbered losers by 672 to 239, while turnover for Shanghai A shares rose to 119.5 billion yuan ($17.5 billion) from Friday morning's 99.5 billion yuan.

* A massive volume of funds frozen in subscriptions to last week's initial public offering by China State Construction Engineering Corp were returned on Monday, fuelling the market's rally.

* "The release of funds and ample liquidity are fuelling a rally despite a series of IPOs that will bring fresh supplies of shares in coming days," said Zhou Lin, an analyst at Huatai Securities in Nanjing. He said the uptrend for the index in the short term remained unchanged.

* The central bank said late on Friday that China would stick "unswervingly" to an appropriately accommodative monetary policy because recovery in the world's third-largest economy was not yet on a solid footing. [ID:nBJC000425]

* Brokerage shares surged, with CITIC Securities (600030.SS) climbing 4.32 percent to 36.20 yuan, as they were expected to get a boost from the market rally and business from share offerings, which the stock regulator is encouraging to soak up massive market liquidity.

* China's Everbright Securities will begin book-building on Tuesday as it launches an IPO worth about 10 billion yuan, only the country's second IPO by a securities brokerage. [ID:nSHA69082] Shares in its controlling shareholder China Everbright (0165.HK) vaulted 9.5 percent to HK$24.70 in Hong Kong.

* The official Shanghai Securities News reported that China State Construction, which last week raised 50.2 billion yuan in the world's largest IPO so far this year, will list its shares on Wednesday. [ID:nSHA98681]

* The Financial News reported that the first day of business for China's long-anticipated second board for start-up firms attracted 108 applications for IPOs. [ID:nPEK67611]

* China Eastern Airlines (600115.SS) rose 3.72 percent to 6.14 yuan after the official Shanghai Securities News cited an internal company meeting as saying that it swung to a profit in the first half of this year, buoyed by cost cutting and improved market conditions. [ID:nSHA99399]

* Metal shares rose, with Aluminum Corp of China (601600.SS) jumping 6.88 percent to 19.12 yuan, shrugging off the firm's warning of a first-half loss as investors focused on future earnings prospects and surging Shanghai aluminium prices.

Disclosure: Author does not own any of the stocks discussed here.

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