China Shares Could Ease On Profit Taking

(RTTNews) - After posting the largest single-day gain in four months, the China stock market could be in store for a bit of consolidation when the Shanghai Composite Index opens on Thursday - although positive global cues could minimize the losses. The market had shed more than 11 percent since the opening of the Olympics in Beijing on August 8, but the SCI jumped more than 7 percent on Wednesday.

The global forecast is a generally positive one for the Asian markets, thanks to stronger than expected corporate results out of the United States. Even the recently battered American financial stocks rallied overnight, although concerns about the mortgage lending industry continued to weigh on investors and capped those gains. That was enough to lead the U.S. markets modestly higher, and the Asian bourses are predicted to do the same.

The SCI finished sharply higher on Wednesday, boosted by expectations that the government will soon take measures to boost the economy and the stock market. Investment bank JPMorgan said in a note that the Chinese government is considering a stimulus package of 200 to 400 billion yuan, but the government still is yet to confirm this report. Properties, power companies and financials were the main beneficiaries.

For the day, the index soared 178.81 points or 7.63 percent to close at 2,523.28 after trading between 2,306.66 and 2,523.47 on turnover of 59.0 billion yuan. The Shanghai A-share index jumped 187.71 points or 7.63 percent to close at 2,648.75 on turnover of 58.7 billion yuan, while the Shenzhen A-share index added 50.30 points or 7.21 percent to 747.58 on turnover of 26.2 billion yuan.

Among the gainers, Datang Huayin Electric Power, Poly Real Estate Group, Huaxia Bank, CITIC Securities and Haitong Securities all surged by the 10 percent daily limit, while China Vanke gained 8.4 percent, China Merchants Property Development climbed 9 percent, Industrial Bank rose 7.4 percent, Industrial and Commercial Bank of China advanced 6.5 percent, Huadian Power International gained 4.4 percent, Huaneng Power International added 0.8 percent, China South Locomotive & Rolling Stock moved up 4.9 percent, Tsingtao Brewery gained 7.1 percent, Hainan Airlines advanced 7.1 percent, China Life Insurance surged 9.3 percent and Shanghai Electric Power rose 7.5 percent.

Wall Street offers a positive lead as stocks ended Wednesday's session with notable gains after investors looked for bargains following sharp losses in the previous two sessions. Positive quarterly results from Hewlett-Packard (HPQ | Quote | Chart | News | PowerRating) contributed to the strength, although weakness in Fannie Mae (FNM | Quote | Chart | News | PowerRating) and Freddie Mac (FRE | Quote | Chart | News | PowerRating) weighed on the markets at times.

Hewlett Packard gave investors reason to buy into the markets after the printer and computer maker reported better than expected quarterly earnings and offered an upbeat forecast for its current quarter. But Fannie Mae and Freddie Mac continued to pressure the markets, falling more than 20 percent earlier in the week on reports that the Treasury may have to bail them out. Investors have been increasingly worried that if the government does bail them out, their stocks may drop to zero.

Despite the weakness with Fannie Mae and Freddie Mac, other financials rallied in late day trading, contributing to the strength seen in the broader markets at the end of the session. Also, Microsoft Corp. (MSFT | Quote | Chart | News | PowerRating) said as part of its five-year partnership deal with software developer Novell Inc. (NOVL | Quote | Chart | News | PowerRating) it will invest an additional $100 million to buy redeemable certificates for expanded support from Novell to run their products together.

Also, industry data released on Wednesday showed that mortgage application volume declined last week due in part to a 3.7 percent decline in refinancing activity.

The major averages rallied in the final hour of the session, sending the averages back into positive territory. The Dow closed up 68.88 points or 0.6 percent at 11,417.43, the Nasdaq closed up 4.72 points or 0.2 percent at 2,389.08 and the S&P 500 closed up 7.85 points or 0.6 percent at 1,274.54.

In corporate news, Bank of Nanjing Co Ltd saw first-half net profit rise 125.6 percent to 788.32 million yuan due to higher net interest income, the bank said on Wednesday. Operating revenue rose 77.9 percent to 1.47 billion yuan in the first six months of the year, the bank said in a report filed with the Shanghai stock exchange. Net interest income grew to 1.27 billion yuan from 855.24 million a year ago.

Also, China CITIC Bank Corp saw a 162 percent jump in the first-half of 2008 profit, the company said on Wednesday, standing at 8.43 billion yuan versus 3.22 billion yuan a year ago. As of the end of June 2008, the bank holds $384 million residential mortgage backed securities secured by Fannie Mae and $797 million residential MBS secured by Freddie Mac, and institutional debt issued by Fannie Mae and Freddie Mac of $232 million and $171 million, respectively.

Finally, Digital China Holdings Limited saw gross profit to June 30 increase 33.24 percent on year, the company said on Wednesday, standing at 662 million Hong Kong dollars. Revenue increased an annual 27.38 percent to 10.011 billion Hong Kong dollars, while profit attributable to shareholders amounted to 114 million Hong Kong dollars, representing a 74.70 percent growth on year.

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