Stimulus package sparks 7.27% market rally

By Ding Yining  |   2008-11-10  |     ONLINE EDITION

SHANGHAI’S key stock index surged more than 7 percent today after the State Council yesterday announced a 4 trillion yuan (US$586 billion) stimulus package to boost domestic demand.

The market was driven by building material and construction firms after China pledged it would loosen credit conditions, cut taxes and launch a massive infrastructure spending program to bolster the country’s economy in the wake of a global financial crisis.

The Shanghai Composite Index rallied 7.27 percent, or 127.09 points, to 1874.80 points. Turnover was 58.9 billion yuan (US$8.63 billion). Only three shares dropped on the Shanghai market while 875 gained and 30 remained unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic market, was up 6.42 percent, or 30.00 points, to 497.35 points. Turnover was 21.8 billion yuan.

The central 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 spent over the next two years, the Beijing-based State Council said yesterday on its Website.
As much as 10 sections will benefit from the finance program, including rural infrastructure, electricity, the environment and technological innovation.

SAIC Motor Co, China's largest car maker, accelerated 9.54 percent to 5.51 yuan.

"The market enjoyed a big boost after the stimulus packaged was announced over the weekend and growing turnover suggested new inflows of capital, which will support the index to rebound further. We forcast the index will climb despite some minor fluctuations," said Wu Kongyin, an analyst with United Securities.

Brokerages also gained today. Haitong Securities climbed 9.10 percent to 13.79 yuan. Sinolink Securities rallied 10 percent to 24.07 yuan.