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By Li Zengxin (chinadaily.com.cn)
In response to the fourth interest hike this year by the central bank last night, Chinese stocks opened nearly 80 points lower than yesterday but soon rallied to near the 5,000-point mark. Although both the major indices broke records on their closes today, the benchmark Shanghai index failed to reach that critical psychological frontier.
Total turnover of stocks in the major indices expanded to 258 billion yuan, the largest in two weeks.
The Shanghai Composite Index opened 78.86 points lower at 4,876.35, and hit the lowest 4,861.27 after the opening. But soon it returned to higher levels. As it moved toward the 5,000-point mark, the downward pressures increased. At its highest of 4,999.20, the index was immediately dragged down by selling bids on individual stocks. Finally, it closed at 4,980.08, 24.87 points or 0.5 percent higher than the previous close.
The Shenzhen Component Index, tracking the smaller Shenzhen Stock Exchange, opened lower at 16,704.93 and stayed within a range of between 16,667.94 and 17,446.10. The index closed at 17,331.99, up 472.02 points or 2.8 percent.
Of the A shares listed in Shanghai, 524 went up, 243 closed down and 75 finished unchanged. Of the gainers, 22 were sealed at the maximum growth cap of 10 percent.
In Shenzhen, 355 A shares closed higher, including the 12 best performing stocks with 10 percent growth, while 198 slipped down and 83 ended flat.
Chalco, TCL and Wuliangye Yibin, three of the largest traders, climbed over 5 percent. The Industrial and Commercial Bank of China, with the largest trading volume in Shanghai, however, dropped 1.7 percent to slow the index.
A shares in the food, services and paper industries led the surging waves. B shares finished mixed, with 49 of the total 109 B shares edging up.
As the stocks broke through previous highs this week, the total market value of China's stock market also made new records, surpassing the 22 trillion yuan mark yesterday when the Shanghai index closed near the 5,000-point line. All securities listed in the two stock exchanges were worth 22.02 trillion yuan, 1.08 trillion yuan higher than China's gross domestic product last year.
In the meantime, this new round of growth led by the blue-chip heavyweights has brought mutual funds, usually pursuing steady but slower growth from large-cap stocks, enormous profits. All Chinese open-end fund categories recorded gains in July, according to the latest Lipper fund research.
Effective today, the interest rate on bank deposits is raised by 27 basis points, and the lending rate by 18 basis points, the People's Bank of China (PBOC) said. After the hikes, the benchmark one-year deposit rate is 3.6 percent while the one-year lending rate is 7.02 percent. The demand deposit interest rate remains unchanged at 0.81 percent.
The central bank said the move is supposed to "control money supply and credit, and stabilize inflation expectation." The annual growth in the broad measure of money supply, M2, grew by 18.5 percent in July, 1.42 percentage points higher than in June and the fastest yet this year. The annual growth in the consumer price index surged to 5.6 percent in July, the highest in a decade.
On the other hand, the country's major outlet for diverting the excessive capital in the domestic market to overseas markets is blocked. The global capital markets, shaken up by US subprime mortgage woes, are dampening China's demand for overseas investment through qualified domestic institutional investor (QDII) products.
Analysts said that nearly all QDII products that invest in overseas shares managed by various qualified institutions have suffered losses because of the worldwide stock market slump. This has dealt a heavy blow to investors. But there are those who hold the view that the past week's share price slide has provided an opportunity for QDII funds to buy low.
Nevertheless, the poor performance of QDII stock funds has generally made it more difficult for the managing institutions to attract new investments, at least for the time being. The prospect of further renminbi appreciation has made QDII funds look even less attractive.
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