Banks lead Chinese shares up

Chinese main stock index surged 2.65 percent on Wednesday, led up by banks on the hope that authorities would cut the tax on interest from bank deposits, which could reduce pressure for further interest rate hikes.
Shipping giant China COSCO Holdings was also a star as it jumped its daily limit of 10 percent to a record 18.02 yuan, after soaring 93 percent from its IPO price in Tuesday's debut.
Many analysts have been telling investors that 18 yuan is a reasonable price for China COSCO given its earnings growth, and that the stock will easily break 20 yuan if proposals to obtain assets from its parent group go through.
The Shanghai Composite Index closed at 4,078.599 points in a continued rebound from Tuesday's intra-day low of 3,818.853. Gaining Shanghai stocks outnumbered losers by 694 to 165. Turnover in Shanghai A shares was modest in the morning but picked up to total 125.4 billion yuan ($16.5 billion) for the day, up from Tuesday's 120.6 billion yuan.
"Aside from the banks' strong performance, today's market behaviour is also the result of a natural rebound off the index's low on Tuesday," said Qian Qimin, analyst at Shenyin & Wanguo Securities.
But he, like many other analysts, believes the market will probably continue consolidating under May's record high of 4,335 points for some weeks or even months, given uncertainties over policy and future heavy share supplies.
Parliament began debating on Wednesday a plan to issue $200 billion worth of yuan bonds to raise proceeds for the government's new overseas investment agency. This could help to tighten market liquidity in the second half of 2007.
However, the market ultimately decided to take positively a report by the official China Securities Journal, which said parliament might give the cabinet authority to cut or abolish the 20 percent tax on interest earned from bank accounts.
This could cool the stock market by drawing some money back to bank deposits. But it could also benefit banks, by pushing tax-adjusted real deposit rates nearer positive territory, where authorities want them, without the need for a major rise in interest rates.
Most banks rose, with Bank of Communications up 2.72 percent at 11.69 yuan. Fujian Expressway Development rose 5.6 percent to 8.11 yuan after the highway operator said it would expand a highway in the south-eastern province of Fujian at a total cost of 14.1 billion yuan.
China Shipping Development Co surged 7.24 percent to 24.01 yuan after saying it would offer 2 billion yuan of A-share convertible bonds next week to fund the purchase of some of its parent group's assets.
Celebrities Real Estate Development Group climbed 6.11 percent to 13.03 yuan after announcing plans to raise about 3 billion yuan with a public offer of up to 300 million A shares. Proceeds would be used to invest in five projects which the firm estimates will ultimately bring it 7.3 billion yuan of income.