7-month lowest close leads to tech rebound ( 2003-08-20 08:08) (China Daily)
China's shares edged up Tuesday in a technical rebound a day after posting
their lowest close in more than seven months, with that steep fall helping ease
persistent selling pressure, brokers said.
The benchmark Shanghai composite index, grouping hard-currency B shares for
foreigners and yuan-denominated A shares, climbed 0.32 per cent, or 4.623
points, to 1,449.712 points.
The index has fallen 5.8 per cent since mid-July, hit by factors from a rash
of stock offers to tightened bank lending.
The Shenzhen sub-index fell 0.29 per cent, or 9.40 points, to close at
3,246.43 points.
"The market is experiencing a technical rebound, as investors cautiously buy
shares in companies that have dropped a lot but show signs of bouncing back,"
said Simon Wang, an analyst at Xiangcai Securities.
Copper wire manufacturer Xinxin Industrial Co Ltd was the top A-share gainer
yesterday, jumping 10 per cent to finish at 8.58 yuan (US$1.03). It has climbed
13.2 per cent since chalking up a record low of 7.58 yuan (91 US cents) on
August 1.
Chronic loss-making chicken breeder Shanghai Dajiang Group Co Ltd was
yesterday's most active B share, sliding 3.02 per cent to US$0.289.
Analysts said trading had grown choppy after the Shanghai composite index
dipped below the psychologically important 1,450-point level on Monday.
"The index is likely to move narrowly in the next two days amid bearish
sentiment, with the downside trend keeping the index at a low level in the near
future," Wang said.
The Shanghai B share index finished 0.18 per cent higher at 101.072 points,
while its Shenzhen counterpart dropped 3.29 per cent to 222.57. Turnover in
Shanghai B shares plunged 41 per cent to a thin US$10.511 million.
In the foreign exchange market, China took another step yesterday to ease the
upward pressure on its currency by letting local firms involved in international
project contracting and labour services keep all foreign exchange earnings.
Analysts said the move, though expected to have limited impact on the yuan,
highlighted the government's eagerness to take the heat off the yuan and reform
the rigid currency regime.
China has recently allowed China Development Bank to issue the country's
first domestic US dollar bonds and made it easier for foreign multinationals
operating in the country to deal in foreign exchange.
From September 1, firms involved in the latest relaxation, including those in
international shipping services, will be allowed to hold all foreign exchange
income from the previous year, up from 20 per cent, the State Administration of
Foreign Exchange (SAFE) said.
The reason for the move was that the companies were dealing in foreign
exchange more frequently than others, the administration said in a statement
published on www.safe.gov.cn.
An SAFE official said Chinese project contracting and labour services firms
earned some US$1.25 billion in 2002, a fraction of the overall service incomes
of nearly US$40 billion.
China had a current account surplus of US$35.4 billion in 2002.
The move is seen as cooling the upward pressure on the yuan by soaking up
some of the capital inflows, fuelled by strong foreign investment and a solid
trade surplus.
"This is a small part of policy changes designed to reduce the supply of
foreign exchange and boost demand," said Chen Xingdong, chief economist at BNP
Paribas Peregrine in Beijing.
"The administration's move indicates a change from compulsory selling of
foreign exchange by companies to that based on firms' own willingness."
The yuan is convertible only on the current account, but exporters must now
sell most of their hard currency earnings to banks, which then trade them on the
foreign exchange market.
