Shanghai market surges at midday on stimulus package

By Lydia Chen  |   2008-11-10  |     ONLINE EDITION

SHANGHAI’S key stock index surged nearly 5 percent in the morning session today, driven by building material and construction firms after China pledged it would loosen credit conditions, cut taxes and embark on a massive infrastructure spending program to bolster the country’s economy.

The benchmark Shanghai Composite Index jumped 4.98 percent, or 87.06 points, to 1,834.77 points at 11:30am.

Gainers outnumbered losers 820 to four and one did not change.

The Shenzhen Composite Index, which tracks the smaller domestic market, was up 4.20 percent, or 19.64 points, to 487 points.

Baoshan Iron & Steel Co, China's biggest steel maker, and Anhui Conch Cement Co, the country's biggest cement maker, jumped the 10 percent daily limit on speculation the stimulus package will spur construction projects. Sany Heavy Industry Co, China's biggest maker of machinery for handling concrete, also surged the maximum to finish the session at 13.13 yuan (US$1.92).

The government announced a 4 trillion yuan stimulus plan to prop up growth in the world’s fourth-largest economy. The funds, equivalent to almost a fifth of China's gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said yesterday on its Website.

The money will be used to finance programs in 10 major areas: low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake in Sichuan Province.

It comes amid indications that economic growth, exports and various industries are slowing in China.

Policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan.

Commercial banks' credit ceilings will be abolished to channel more lending to priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.