Investors seize on Hu remarks to turn markets
Mainland and Hong Kong stocks finished the week on an upbeat note yesterday as investors, cheered by comments from President Hu Jintao, set off a roller-coaster buying spree that sent both markets soaring after a morning rout.
The Shanghai Composite Index ended up 26.1 points or 0.94 per cent to 2,801.817 after tumbling as much as 1.94 per cent.
In Hong Kong, the Hang Seng Index recovered almost 700 points from an early morning low to close 131.5 points or 0.58 per cent higher at 22,862.6. The local benchmark advanced for the second consecutive week for the first time in almost three months.
'Investors embraced President Hu's remarks on the economy and drove up the index,' said TX Investment Consulting analyst Qiu Yanying. 'His rare comments about the economy made some investors believe that the market outlook is good.'
Mr Hu told foreign journalists yesterday that the mainland would seek sustainable economic growth, spurring speculation that the nation could loosen monetary tightening to support the growth and expansion of companies.
The rest of the region was not as interested in the mainland's renewed commitment to growth, and chose to dwell instead on the lower-than-expected second quarter economic growth figures released on Thursday in the United States. Japan slumped 2.11 per cent, Korea slid 1.31 per cent, Taiwan lost 0.31 per cent and Malaysia declined 0.34 per cent.
The mainland's central bank decided to raise the lending quota by 5 per cent on Thursday to widen companies' access to bank loans and support economic growth.
Mainland authorities had pledged to beat back inflation earlier this year, but the tightening measures that they implemented, such as lending curbs, have hindered the development of companies.
Leading mutual funds have been reluctant to increase their holdings as they question whether forecast earnings can be met in the current market environment and whether they are supported by current stock prices.
Meanwhile, market observers said that mainland and Hong Kong markets might be range-bound next week because investors would need more than just upbeat talk before they bet on a long-term rally.
'Market sentiment is still fluctuating from speculation over whether there will be some policy changes in the mainland,' said Linus Yip Sheung-Chi, a strategist at First Shanghai Securities.
