CHINA SHOTO Worth 394p

China A-shares close sharply higher, key index up 130 pct for 2006 - UPDATE
AFX


SHANGHAI (XFN-ASIA) - A-shares in Shanghai and Shenzhen closed sharply higher on window-dressing activity and a rising yuan with heavyweight banks, property developers and airlines snapped up in the last trading day of 2006, dealers said.

The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 107.88 points, or 4.20 pct, at 2,675.47, a fresh all-time high, after moving between 2,585.42 and 2,698.90.

The key index surged 130 pct for the year, and was up 14.16 pct for the week, its biggest weekly gain in over 11 years. Turnover rose to 59.09 bln yuan from 50.52 bln in the previous session.

'The market was driven sharply higher by institutional window-dressing, with almost all heavyweight stocks in demand,' said Wang Mingzhi, an analyst at GF Securities.

Analysts said the bullish trend will continue for the beginning of 2007, but there could be some corrections in the medium term.

'At the beginning of 2007, I believe the market will maintain its strong momentum on the back of adundant liquidity and a strong yuan,' said Cao Yan, an analyst at Soochow Securities.

'But investors should also stay a bit more cautious because the overall price-to-earnings ratio is getting relatively high,' Cao said.

Banks continued to see strong buying interest with Bank of China (SHA 601988; HK 3988) surging its 10 pct daily limit to 5.43 yuan. It has jumped over 35 pct for the week.

Industrial and Commercial Bank of China (ICBC) (SHA 601398; HK 1398) rose 0.35 yuan or 5.98 pct to 6.20. It has gained over 33 pct for the week.

Shanghai Pudong Development Bank (SHA 600000), in which Citigroup hopes to increase its stake to 19.9 pct, jumped 1.14 yuan or 5.65 pct to 21.31.

Shenzhen Development Bank Co Ltd (SZA 000001), in which Texas Pacific unit Newbridge Capital has a 17.88 pct stake, added 0.45 yuan or 3.21 pct to 14.47.

China Merchants Bank Co Ltd (SHA 600036) rose 0.79 yuan or 5.07 pct to 16.36 and Huaxia Bank Co Ltd (SHA 600015) climbed 0.22 yuan or 3.07 pct to 7.39.

China Minsheng Banking Corp Ltd (SHA 600016), in which International Finance Corp holds a 1.08 pct stake, added 0.39 yuan or 3.98 pct to 10.20.

Real estate developers and airlines were buoyed by a strong yuan. The central bank has set the yuan central parity rate at a record of 7.8087 to the dollar, a new high.

Shanghai Lujiazui Finance & Trade Zone Development Co Ltd (SHA 600663; SHB 900932; ADR SLUJY) climbed its 10 pct daily limit to 13.88 yuan.

Shanghai Jinqiao Export Processing Zone Development Co Ltd (SHA 600639; SHB 900911) rose 0.68 yuan or 6.12 pct to 11.80. Shanghai Wai Gaoqiao Free Trade Zone Development Co Ltd (SHA 600648; SHB 900912) added 0.37 or 5.81 pct to 6.74.

Air China Ltd (SHA 601111; HK 0753) surged its 10 pct daily limit to 5.15 yuan.

China Southern Airlines Co Ltd (SHA 600029; HK 1055; ADR ZNH), the country's largest carrier by fleet size, also gained 10 pct to 4.09 yuan.

Regional carrier Shanghai Airlines Co Ltd (SHA 600591) added 0.28 yuan or 8.54 pct to 3.56 after reporting a gain of 42 mln yuan from the sale of a backup engine worth 6 mln usd to Wells Fargo Bank Northwest National Association.

Dazhong Transportation (Group) Co Ltd (SHA 600611; SHB 900903) rose 0.36 yuan or 5.22 pct to 7.25 after its board approved a proposal to buy 60 mln new shares to be issued by Everbright Securities for 158.4 mln yuan.

Shanghai Brilliance Group Co Ltd's (SHA 600631) trading was suspended after reports that its parent firm's chairman is under investigation.

The Shanghai A-share Index soared 114.04 points or 4.22 pct to 2,815.13 on turnover of 58.75 bln yuan and the Shenzhen A-share Index was up 11.67 points or 2.09 pct at 569.58 on turnover of 25.34 bln yuan.

The FTSE/Xinhua China A 50 Index was up 374.19 points at 9,207.45. The FTSE/Xinhua China A 200 Index gained 200.85 points to 6,133.67 and the FTSE/Xinhua China A 600 Index was up 138.97 points at 5,037.34.

(1 usd = 7.82 yuan)

lake.xu@xinhuafinance.com