Fund rumors spark gains in Shanghai shares

By Pan Xiaoyi  |   2008-11-7  |     ONLINE EDITION

SHANGHAI’S key stock index gained nearly 2 percent today, led by financial firms and oil refiners as investor confidence was restored on speculation a government-run intervention fund will be created.

The Shanghai Composite Index gained 1.75 percent, or 29.99 points, to 1,747.71 points, after reaching an intraday low of 1,680.60.

Gainers outnumbered losers 736 to 122 while 18 remained unchanged. Turnover in the local market rose to 29.64 billion yuan (US$4.36 billion), compared with 27.77 billion yuan yesterday.

The Shenzhen Composite Index, which tracks the smaller domestic market, was up 0.94 percent, or 4.34 points, to 467.35 points.

“The undervalued shares reflected the dim outlook on future performance. The idea of the intervention fund has been around for some time. But the timing now is more appropriate,” Essence Securities Co said in a note.

The intervention fund, also known as a buffer fund, can prevent irrational moves and sharp fluctuations in the mainland's stock markets.

Former president of the China Securities Regulatory Commission, Zhou Zhengqing, recently called for the launch of the buffer fund to stabilize the market.

According to Guotai Junan Securities Co, an intervention fund worth 300 billion yuan could effectively stabilize the domestic market.

Almost all financial shares increased today except Haitong Securities Co, which sank as a lock-up period of its non-tradable shares will expire later this month. Haitong Securities Co fell 1.71 percent to 12.64 yuan.

Shanghai Pudong Development Bank, the Chinese partner of Citigroup Inc, advanced 5.19 percent to 12.76 yuan. China Merchants Bank Co added 3.73 percent to 12.52 yuan. Ping An Insurance (Group) Co climbed 4.75 percent to 25.15 yuan.

Liu Kan from Guoyuan Securities Co said the lenders will experience ups and downs in the short term.