China's stocks rebound as blue chips regain form

SHARES in Shanghai rebounded yesterday with the recovery of blue chips to put an end to a three-day drop.

The benchmark Shanghai Composite Index, which tracks yuan-backed A shares and hard-currency B shares, edged up 0.56 percent, or 28.89 points to 5,180.51 yesterday. Gainers outnumbered decliners 493 to 288 while 69 companies were unchanged.

The turnover shrank to 118.37 billion yuan (US$16.33 billion) from the day before's 174.74 billion yuan.

Dai Ming, a Kingsun Investment Management Co analyst, said the market was showing recovery as the blue chips, which led the market tumble recently, were valued at a relatively low level.

Banks, property and steel sectors have been the main drag on the market recently as they are the most affected by the tight monetary policy and the central bank's measures to cool the economy.

"It's not a surprise to see the rebound of blue chips as the current valuation is quite reasonable for investors to build upon," said Dai.

Three banks - Industrial & Commercial Bank of China, China Construction Bank and Shenzhen Development Bank - yesterday reported a profits growth forecast yesterday.

ICBC, the country's biggest lender, said its profits will grow 60 percent 2007 on rising commission income. The bank rose 1.95 percent to 7.86 yuan.

Goldman Sachs rated the bank "buy" and noted it "top pick" among Chinese public banks.

China Construction Bank rose 0.64 percent to 9.41 yuan. While China Merchants Bank increased 1.4 percent to 39.70 yuan.

The small-cap start up companies also performed actively as China's top securities regulator said that the board for growth market will be launched in the first half of this year, said Qian Qimin, a Shenyin & Wanguo Securities analyst.

Qian advised investors to trim their positions on the banks.