Shanghai index rises on support of commodities sector

By Lydia Chen  |   2008-12-17  |     ONLINE EDITION

SHANGHAI'S key stock index rose today thanks to an increase in the metals sector after the government said it plans to support commodities producers while speculation also continued that interest rates will drop.

The Shanghai Composite Index gained 0.09 percent, or 1.81 points, to 1976.82 points at 3pm.

The Shenzhen Composite Index, which tracks the smaller domestic market, was up 0.94 percent, or 5.63 points, to 607.39 points.

Minmetals Development Co, a unit of China's biggest state-owned metals trader, surged and Shandong gold producers also rose on the government's pledge to increase raw materials reserves to bolster the metals and petroleum industries.

Minmetals surged 8.89 percent to 12.13 yuan (US$1.77). Shandong Gold climbed 4.70 percent to 49.45 yuan and Zhongjin Gold added 3.19 percent to 36.60 yuan.

Zhongjing Gold said it plans to sell as much as 1.7 billion yuan of debt to boost operating capital.

The government's plan to bolster inventories of "important materials" is among several measures to help the steel, metal and petroleum industries, which have suffered from losses as prices plunged, the Ministry of Industry and Information Technology said yesterday.

The US Federal Reserve yesterday cut its target rate for overnight loans between banks to a range from zero to 0.25 percent, a record low. The central bank also said it will "employ all available tools to promote the return of sustainable economic growth and to preserve price stability."

China may follow the US move in cutting interest rates to revive the economy. Zhou Xiaochuan, China's central bank governor, yesterday hinted in Hong Kong that domestic interest rates may be cut again this month depending on how quickly inflation slows.

The People's Bank of China has slashed rates four times since September as third-quarter economic expansion cooled to the weakest pace in five years.