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Xingfu brings hope to domestic market
( 2002-09-04 09:22 ) (1 )

China's shares closed a touch higher on Tuesday on speculative buying in mediocre firms sparked by a resounding rise in domestic A-share garment maker Hubei Xingfu Industry Co, brokers said.

Xingfu's A shares (Xingfu means happiness in Chinese language), off limits to foreign investors, soared 32 per cent to 6.78 yuan (81.88 US cents) on heavy volume of 21.36 million shares, the top gainer and most active stock of the day.

Improved sentiment in the A share market then spread to hard-currency B shares, which are available to foreigners, brokers said.

Shanghai's B share index closed up 0.14 per cent at 151.513 points while Shenzhen's was 0.30 per cent higher at 243.35 in thin trade.

"The day's trade was dominated by speculation in poor earners as punters were encouraged by resumed trade in Xingfu," said a floor trader at Shenyin & Wanguo Securities.

But brokers said the potential for share prices to rise further would be limited due to persistently sluggish trade.

Turnover on the B-share markets came to just US$5.04 million in Shanghai and HK$28.75 million (US$3.47 million) in Shenzhen.

Analysts said the benchmark Shanghai composite index, which closed up 0.32 per cent at 1,674.07 points, was likely to meet resistance at the psychologically important 1,700-point level.

Shenzhen's sub-index also edged up 0.26 per cent to finish at 3452.72.

"The Shanghai composite index has moved narrowly just below the 1,700 level for many weeks and we do not expect an immediate breakthrough," said CITIC Securities analyst Wu An.

Xingfu's Shanghai-listed A shares were last traded at 5.14 yuan (62.07 US cents) on April 19, before being suspended after the company posted its third straight year of net losses for 2001.

The bourse approved a resumption of trade in Xingfu's counter after the firm posted a slim profit for the first half of 2002.

That sparked speculation in other chronic loss makers on renewed hopes that government-orchestrated asset restructurings could reverse the fortunes of poorly performing companies.

"Xingfu triggered a fresh wave of buying in companies with the potential for corporate asset restructuring," said Shao Rui, a senior analyst at Shanghai Securities.

"Speculation today was also propelled by a series of recent domestic media reports that local governments have strengthened efforts to restructure poorly performing companies to improve overall corporate health," Shao said.

Loss-making trade firm Shenxin Taifeng Co surged its 10 per cent daily limit to 10.42 yuan (US$1.26) by the close to become Shenzhen's top A-share gainer.

Shanghai's yuan-denominated A-share index ended up 0.32 per cent at 1,747.306 points while Shenzhen's closed up 0.31 per cent at 520.19.

On the B-share markets, chronic loss maker Shanghai Tyre and Rubber Co was the Shanghai market's top performer, ending up 0.71 per cent at US$0.702.

Shenzhen Petrochemical Co, which has posted heavy losses for the past year and a half, was the second biggest gainer in Shenzhen market, ending up 1.72 per cent at HK$4.15 (52 US cents).