Markets rally in wake of package

By Ding Yining  |   2008-11-11  |     NEWSPAPER EDITION

SHANGHAI'S key stock index surged more than 7 percent yesterday after China's State Council, or Cabinet, announced a new stimulus package estimated at 4 trillion yuan (US$586.03 billion) to boost domestic demand.

The index was driven by building-material and construction companies after China pledged over the weekend it would loosen credit conditions, cut taxes and embark on a massive infrastructure spending program to bolster the country's economy.

The Shanghai Composite Index advanced 7.27 percent, or 127.09 points, to 1,874.80 points.

Turnover was 58.9 billion yuan, almost double that of last Friday's 29.6 billion yuan.

Yesterday's increase added nearly 674 billion yuan to market value. Only three shares fell on the Shanghai bourse, while 875 gained and 30 remained unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic market, was up 6.42 percent, or 30 points, to 497.35 points. Turnover there was 21.8 billion yuan.

Investors in both Asia and Europe gave a resounding thumb's-up to the China package.

For example, Japan's Nikkei 225 index surged 5.8 percent to 9,081.43 on the back of the news. And oil prices rose US$2.69 to US$63.70 a barrel in Asian trading on the New York Mercantile Exchange.

Early trading in Europe yesterday was all upwardly mobile. The FTSEurofirst 300 index of top European shares was up 2.7 percent at 938.95 points in the morning, on track for its eighth day of gains in the past 10.

The DJ Stoxx European basic resources index jumped nearly 11 percent, tracking metal prices.

The 4-trillion-yuan injection, equivalent to almost a fifth of China's gross domestic product last year, will be spent over the next two years.

As much as 10 sections will benefit from the finance program, including rural infrastructure, electricity, water, transportation, the environment and technological innovation.