China's main index rises

China's main stock index rose 0.38 percent on Tuesday, rebounding from an early fall triggered by news that regulators had punished eight bank branches for lending money used illicitly in stock and real estate investment.
Traders said the rebound showed many investors remained bullish in the face of government efforts to cool the economy and the market - meaning the index might hit May's record high of 4,335 points by the end of this month.
"Today's bank news had little impact on the overall market, so we still expect the market to climb above the 4,335-point mark sometime within the next two weeks," said Zheng Weigang, analyst at Shanghai Securities.
The Shanghai Composite Index ended at 4,269.524 points, after hitting a low of 4,209.575 in the morning. On Monday, the index jumped 2.92 percent, bringing its gains from an intraday low on June 5 to more than 25 percent.
Gainers outnumbered losers by 556 to 305. But turnover in Shanghai A shares was 178.1 billion yuan ($23.4 billion), well down from May's levels of over 200 billion, suggesting some investors remained cautious about possible government action.
"People are still worried about the possibility of an interest rate hike, and by the idea that the index may have gone too high too quickly," said Guo Yanling, another analyst at Shanghai Securities. Investors viewed the crackdown on bank lending as another, modest step by authorities to cool the stock market. When the index hit 4,335 on May 29, authorities hiked the stock transaction tax, triggering a plunge that pushed the index down as much as 21 percent.
However, analysts said that given the large amounts of fresh money still entering the stock market from new mutual funds and individual investors, the bank loan crackdown was not expected to cut fund inflows into stocks by much.
The punishments were relatively minor - warnings and fines for executives - so share prices of the punished banks were not affected. Shares in many of them actually rose, with Merchants Bank gaining 0.54 percent to 24.11 yuan.
Pudong Development Bank closed down 0.05 percent at 36.97 yuan after Reuters quoted industry sources as saying Xu Feng, formerly a senior banking regulator, would replace Fu Jianhua as president.
The initial response to the news was mixed. Some fund managers thought Xu's ties to Beijing and experience in dealing with foreign banks would help Pudong Bank's expansion, but others speculated that Xu's arrival might, in the short term at least, complicate Citigroup's talks on raising its stake in the bank to nearly 20 percent from 4 percent.
Major shareholders in Bank of Ningbo soared after China's stock regulator said it would review the bank's IPO application this Friday. Shanshan Co jumped its 10 percent daily limit to 22.14 yuan and Ningbo Fubang also surged 10 percent to 9.82 yuan.
"This news will continue to affect those shares throughout the week," said Guo Jinli, analyst at Merchant Bank. Real-estate stocks were also strong as the yuan edged up to another post-revaluation high against the dollar. Tianhong Baoye, a Beijing-based real-estate company, jumped its 10 percent daily limit for the sixth straight day to 25.74 yuan. It has been soaring since it announced last week a plan to buy assets from its parent with a placement of 550 million shares. "The appreciation of the renminbi is raising some stocks' attractiveness for investment - real-estate stocks may outperform the market in coming days," said Guo at Shanghai Securities.
Sichuan Changhong Electric jumped its 10 percent daily limit for the second day to 12.01 yuan after Microsoft Corp agreed to pay for a stake in the company and develop digital home entertainment products with it. In a sign that short-term speculators remained prominent in the market, 35 "special trading" stocks - companies which had posted consecutive annual losses - jumped their 5 percent daily limits.