China's stock index ends up on policy reassurance

Published: 27 Dec 2009 23:11:03 PST

SHANGHAI, Dec 28 - China's key stock index closed up 1.51 percent on Monday, led by brokerages including CITIC Securities, with sentiment buoyed by Premier Wen Jiabao's comments that Beijing was committed to seeing through its two-year economic stimulus package.

The benchmark Shanghai Composite Index finished at 3,188.785 points after rising a moderate 0.9 percent last week, also lifted by improving prospects for corporate earnings.

"Investors expect many good stories to unfold in the near term. The economy is recovering rapidly while the government is sticking to an easy money policy and corporate earnings appear to be delivering one positive surprise after another," said Qian Qimin, deputy head of research at Shenyin & Wanguo Securities in Shanghai.

"We will not be surprised if the index rises to exceed its 2009 high of 3,478 pints in the first quarter of next year."

Brokerages, which are likely to benefit the most from a stock bull run, outperformed the broader market.

Top brokerage CITIC Securities closed up 3.57 percent at 29.86 yuan while smaller rival Haitong Securities added 2.17 percent to 18.38 yuan. Both were among Monday's 10 most actively traded stocks.

Gaining Shanghai A shares overwhelmed losers by 819 to 44, while turnover picked up to 110 billion yuan ($16 billion) from Friday's 101 billion yuan.

As China's economy has shown strong signs of a full recovery since the start of this quarter, worries that the government may soon exit its economic stimulus path, and thus reduce liquidity available in China's markets, have become a key negative factor for the stock market.

In an apparent move to soothe investor jitters, Wen told the official Xinhua news agency in an interview over the weekend that it was too early to wind down the government's stimulus policies.

"If we have a too-early exit of the stimulus policies, we may lose all that we have already achieved," he said. ($1 = 6.83 yuan)