Chinese stocks surged to a two-year high on Monday after the government
announced new rules that will allow investors to borrow from brokerages to buy
and sell shares.
The benchmark Shanghai Composite Index gained 1.5 percent to 1,697.28, its
highest close since it finished at 1,715.14 on April 13, 2004. The Shenzhen
Composite Index rose 1.6 percent to 440.13.
The China Securities Regulatory Commission issued trial regulations Sunday
outlining how approved brokerages can lend funds to their clients for the
purchase of shares or lend stocks to them for sale.
The rules, to take effect Aug 1, underscore efforts to stimulate trading and
develop China's capital markets, analysts said.
"The rules will have an important role in stabilizing the stock market and
reducing volatility in stock prices," said Xu Yinghui, an analyst at Guotai
Junan Securities.
Brokerages rose as investors expect the new services to increase their
earnings.
CITIC Securities soared 8.6 percent to 17.20 yuan and Hong Yuan Securities
jumped 4.9 percent to 9.38 yuan.
Banks also rose on optimism over the trading debut Wednesday of Bank of
China's yuan-denominated shares, or "A shares," in Shanghai. The bank, China's
second largest lender, raised a record 20 billion yuan (US$2.5 billion; euro2
billion) in its initial public offering.
"Investors have reached a consensus that BOC's A shares will rise 10
percent-15 percent on Wednesday," said Chen Jinren, an analyst at Huatai
Securities.
Shenzhen Development Bank gained 7.1 percent to 8.10, Hua Xia Bank added 7.1
percent to 4.83 and Minsheng Banking rose 4.1 percent to 4.55.
Meanwhile, in currency dealings the yuan fell against the U.S. dollar.
On the over-the-counter market the dollar was at 7.9953 around 0730 GMT, up
from Friday's close of 7.9943. It traded between 7.9962 and 7.9915, the lowest
point the dollar has traded against the yuan since the current trading system
began almost a year ago.
The dollar closed at 7.9946 on the automatic price matching system, dealers
said. It ended at 7.9920 on Friday.
The dollar-yuan "parity rate" announced early Monday was set at 7.9924, its
lowest level ever, after the dollar weakened Friday on international
markets.
