Rebound hopes buoy Shanghai stock index

The Shanghai Composite Index yesterday hit its highest level since June, led by health care and financial firms, on speculation that a rebounding mainland economy will help end a three-year bear market.

The benchmark rose 0.37 per cent to 2,285.36, the highest level since June 20. The Hang Seng China Enterprises Index rose 0.3 per cent to 11,973.07 as the Hang Seng Index dipped 0.01 per cent.

"The market has great hopes for likely upcoming new policies and believes the new leadership will bring some real catalysts to the market. The rally could extend until Lunar New Year," Wang Aochao, a Shanghai-based analyst at UOB Kay Hian, said.

Bullish sentiment about an economic recovery has boosted A shares in the past month. The CSI 300 Index, which tracks the 300 major firms traded in Shanghai and Shenzhen, was the best-performing index in the Asia-Pacific during the period.

Echoing Wang's view, Kingston Lin, director of research at Fulbright Securities, expects the Shanghai benchmark to test 2,400 to 2,500 this year, as the economy bottoms out. The gauge is trading at 9.9 times price to 12-month forward earnings, compared with 11 times for the Hang Seng Index.

Drugmaker Beijing Tiantan Biological Products jumped 10 per cent to 13.41 yuan (HK$16.48) after the government said the biomedical industry would grow 20 per cent a year.

Banks advanced, led by Shanghai Pudong Development Bank, which rose 3 per cent to 10.32 yuan after the lender said its net income last year might reach 34.2 billion yuan.

China Minsheng Banking rose 4.3 per cent to 8.32 yuan in Shanghai and 1.57 per cent to HK$9.68 in Hong Kong.

The upbeat sentiment over equities was also seen in Hong Kong, where the benchmark ended flat near a 19-month high.

Property firms jumped after Henderson Land Development chairman Lee Shau-kee said Hong Kong property prices could rise by up to 10 per cent this year.

Lin said the Hong Kong benchmark was likely to rise to 26,500 by year-end, with mainland banks and developers having the most potential. Sun Hung Kai Properties rose 2.1 per cent to HK$121.30, while China Overseas gained 2.43 per cent to HK$25.30.