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Monday, August 10, 2015, 17:08

Chinese shares jump 4.9%

By Xinhua

BEIJING - Chinese shares rallied with major indices surging on Monday due to strong market expectations for the reform of state-owned companies.

China's Shanghai Composite index brushed off the weekend's poor economic data to close up 4.9 percent, hitting a two-week high of 3,928 points and just a whisker below the key psychological mark of 4,000.

The smaller Shenzhen Component Index gained 4.31 percent to close at 13,302.96. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, surged 5.03 percent to end at 2,706.72.

The strong performance may be linked to high market expectations over the reform of state-owned enterprises (SOE). Media reports said Monday that China's central authority has approved an ambitious plan to reorganize its SOEs to improve their competitiveness in an increasingly liberalized market.

Mainland investors focused on sector-specific news and brushed off gloomy China data at the weekend on trade and inflation, which reinforced expectations that Beijing will need to roll out more support measures for the economy.

"China's economic indicators are not very good which means monetary policy will continue to be accommodative," said Du Changchun, an analyst at Northeast Securities in Shanghai.

"Investors are also betting that SOE (state-owned enterprise) reforms will inject life into the market. Trading volumes in the stock market today picked up which is a good sign to show that funds are flowing into the market," Du said.

Shipping, railway and cement counters all saw strong buying on expectations of policy support and sector reforms, analysts said.

Trading in some major shipping stocks, including China Shipping Development, China Shipping Container Lines

and China COSCO Holdings, was suspended on Monday pending announcements, adding to speculation they may be merged.

The CSI 300 infrastructure index surged more than 6 percent, CSI energy index climbed 5.4 percent while the real estate index rose 4.6 percent.

China is banking on increased infrastructure spending to support the economy in the second half of the year, while its top economic planning body said on Monday the property market was likely to continue to improve in the second half of this year.

In recent weeks, Beijing has rolled out an unprecedented series of support measures to prevent a full-blown market crash, including cajoling Chinese brokerages and pension funds to buy stocks and cracking down on short-selling.

Stocks tumbled as much as 30 percent at one point in early summer on panic selling, but have started moderating in recent weeks.

Goldman Sachs analysts estimate that the "national team" has potentially spent 860-900 billion yuan to support the stock market in June-July and the potential aggregate size of market-support funds is probably around 2 trillion yuan.

Among the most active stocks in Shanghai was China Shipbuilding Industry, up 10 percent, and China National Nuclear Power surged 9.98 percent.

Close to 300 China funds that oversee more than 1 trillion yuan (US$161 billion) are sitting on the sidelines with "ammunition" to enter the stock markets at any time, the Shanghai Securities News reported on Friday, citing its own calculations.

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