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Market rises on first day after yuan reform

www.chinanews.cn 2005-07-23 19:24:47

(Source: China Daily)

China's stock market rises on first day after yuan reform.

July 23 - Thursday's yuan revaluation showed an immediate upward impact
on China's stock market. However, analysts are cautious of how long this
will last.
The benchmark Shanghai composite index climbed 2.5 per cent to end
Friday's trading at 1,046.32 points, with a turnover more than double
that of the previous day.
Airline and petrochemical stocks led the day's active trading as the
biggest beneficiary of the yuan move, traders said.
Shares in Hainan Airlines, a regional carrier based in South China's
Hainan Province, soared almost 10 per cent to end at 2.33 yuan (29 US
cents), on investors' expectations that China's carriers would face lower
financing costs as they have a large chunk of their borrowings in foreign
currencies.
Prices of China Eastern rose 7.11 per cent and 4.18 per cent for China
Southern.
Investors also poured money into refiners that rely heavily on oil
imports and thus are expected to benefit from lower costs.
Sinopec, Asia's top refiner, rose 5.8 per cent to 3.83 yuan (47 US cents).
"The 2-per-cent yuan revaluation is a direct trigger, but it is only part
of the reason for today's market upturn," said Ba Shusong, a senior
economist with the State Council's Development Research Centre.
"June's economic data, signalling the government's loosening of its
credit tightening policy, plus the progressing reform on the non-tradable
shares, also helped boost investors' morale."
But some analysts were more pessimistic about the market.
The positive impact of the yuan revaluation "may last only two or three
days," said Xu Gang, research head at CITIC Securities.
"The yuan move, in the longer term, will have a negative impact on
China's stock market, especially on the country's exporters," Xu said.
The change will blunt their price edge in overseas markets and burden
them with higher production and operating costs as many pay their bills
and employees in RMB.
During Friday's trading, investors shunned exporters. For example, the
textile firm Youngor Group Co Ltd fell 1.75 per cent to 3.36 yuan (41 US
cents).
Following China's move, Malaysia also unpegged its ringgit from the US
dollar to replace it with a managed float.
The new yuan regime will likely lead to further yuan revaluation over
time and encourage greater currency appreciation in other Asian
countries, thus leading to a burden shift of the US dollar adjustment
from Europe to Asia, said David Woo, head of global forex strategy at
Barclays Capital.
At the first-day trading after revaluation, the yuan closed weaker at
8.1111 to the US dollar.

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          ��Stocks soars over 8% Wednesday (2005-06-08)
          ��China's stock markets slumping to 8-year lows (2005-06-06)

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