Stocks end up but analysts caution rally may not sustain

By Jin Jing  |   2008-7-4  |     NEWSPAPER EDITION

SHANGHAI shares jumped 1.95 percent yesterday, led by real estate developers, banks and metal producers.

But analysts cautioned that the recovery may not be sustainable as the benchmark index still faces mounting risks of a further correction.

The Shanghai Composite Index gained 51.8 points, to 2,703.53 at the close yesterday after moving from 2,566.53 to 2,746.37 during intra-day trading.

Gainers in the Shanghai market outnumbered losers 800 to 18 while turnover grew 70 percent to 74 million yuan (US$10.9 million).

Another factor boosting the market yesterday was the decision by Taiwan authorities to allow funds to increase their investment in China's mainland stock market.

Despite the euphoria, some brokerages said that the rally yesterday may go the opposite way "without the introduction of favorable policies" by the central government, Fujian-based Tian Xin Investment said in a report.

"The key index is unlikely to keep its upbeat sentiment," it added.

The view was echoed by United Securities Co, which estimated the index may drop to a range between 2,600 and 2,560 points.

Among the gainers were Shanghai-based Shimao Property Co which surged to the daily cap of 10 percent to 10.34 yuan ,while China Vanke Co, the largest developer on the mainland, added 0.95 percent to 8.54 yuan.

Advancing banks included China Merchants Bank Co which gained 1.83 percent to 21.15 yuan and Industrial & Commercial Bank of China which edged up 0.42 percent to 4.75 yuan.

Huaneng Power International Inc rose 2.7 percent to 6.84 yuan after China hiked the price of electricity paid to coal-fired producers on Tuesday, which may boost their profits.