China greets Year of Horse with market rally

PUBLISHED : Tuesday, 26 February, 2002, 12:00am
UPDATED : Tuesday, 26 February, 2002, 12:00am

China's first day of stock trading in the Year of the Horse saw a solid rally, helped by last week's interest-rate cut.

However, analysts warned the rise would be short-lived.

The advance, which carried A shares up 2 per cent and B shares up 1 per cent, was likely to run out of steam before long amid fears Beijing would dump state shares on to the market, analysts said.

Stock markets have been closed for two weeks for the Lunar New Year holiday.

Last year, Shanghai's stock prices fell more than 20 per cent and Shenzhen's more than 25 per cent.

Head of Shanghai GT Securities Research Institute Li Kang said: 'There was a good boost from the rate cut but it [won't last].

'Concerns over the possible sale of state shares are still weighing on the market.'

The interest-rate cut, the first in more than 2.5 years, gave a strong boost to property stocks and other big borrowers.

Ma Yilun of Xiangcai Securities said: 'Properties and big users of capital did well. We saw a good recovery from recent falls.'

The rate cut was seen as sharply reducing borrowing costs for local firms - part of the central bank's goal to spur consumption.

The central bank trimmed lending rates by an average of 0.5 percentage point but shaved deposit rates by only 0.25 point.

The narrower spread is expected to trim bank profits this year.

Bank shares were weaker yesterday, with China Minsheng Bank, Shanghai Pudong Development Bank and Shenzhen Development Bank all falling.

B shares rose slightly more than 1 per cent.