Strong Earnings Lift Shanghai Index to Close at 10-Week High

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The Shanghai Composite Index gained 1.85 percent to close at a 10-week high of 3,107.85 points as strong earnings figures and a rally in other Asian markets boosted Chinese equities.

"The index still has room on the upside," said Xie Aihong, an analyst at Rising Securities in Beijing, "as the October rally draws strong support from the economic data and corporate earnings."

"Hot money from overseas on the back of a weak U.S. dollar also helped drive up the indices and improve liquidity conditions," Guodu Securities analyst Zhang Xiang said.   

Turnover in Shanghai was about 160.3 billion yuan (US$23.5 billion), compared with the five-day moving average of 148.8 billion yuan. Gainers led losers 759 to 131.

The Shenzhen Component Index was up 1.73 percent to 12,843.21 points, with gainers leading losers 662 to 153. Turnover was 49 billion yuan, compared with the five-day moving average of 91.5 billion yuan.

Dongguan Development (Holdings) Co. (SZSE: 000828), the owner and operator of highways in the southern manufacturing hub, climbed 9.98 percent to 6.28 yuan, after reporting third-quarter net profit surged 81.54 percent from a year earlier to 94.78 million yuan. The company cited gains from its 20-percent equity investment in Dongguan Securities Co. as a major driver of the profit growth.

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Coal miners led the market's advance, with China Coal Energy Co. (SH.601898) up 5.11 percent to 13.77 yuan. Morgan Stanley said in a report that it expected the company's coal production to rise 15 percent annually in the next few years.  

Bank shares were among the top gainers, with China Merchants Bank (SH.600036) leading the way, surging 4.48 percent to 17.71 yuan.

According to a report Oct.23 by the China Securities Journal, the China Banking Regulatory Commission said commercial banks will soon have to conduct quarterly stress tests to determine their ability to survive in the event of a liquidity crisis. The requirement is part of a larger set of guidelines likely to take effect by year-end that covers commercial banks' management of liquidity risk, the report said.

Insurers also rose, led by China Pacific Insurance (Group) Co.'s (SSE: 601601) 1.86 percent gain to 25.71 yuan.

The country's third-largest insurer, in which U.S. private equity firm Carlyle Group has a 17 percent share, won approval to set up an asset management firm in Hong Kong, the industry regulator said on Thursday.

Qingdao Haier Co. (SSE: 600690), China's largest home-appliance maker, rose 1.27 percent to 18.40 yuan, after reporting its third-quarter net profit rose 48.9 percent to 301 million yuan. The company attributed the rise to its customer-oriented market strategy, effective cash management and innovative business model.

ChiNext, the new growth enterprise market in Shenzhen, was officially launched on Friday, a week before the first batch of 28 companies start trading.

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Shang Fulin, chairman of the China Securities Regulatory Commission, said earlier that the regulator would try to ensure the "stable launch" of the Nasdaq-style board and also make sure it is sustainable.

"Overall, the quality of the first group of companies is pretty good, and they've attracted a lot of interest from investors," Yu Jun, head of research at Citic Securities, said. "However, the later issues might offer a little more variety,"

The first 28 firms to list will raise a combined 15.5 billion yuan, twice the amount originally planned, according to their announcements.

"Assume the stocks double on their debut, and have an 80 percent turnover rate, that's still not a lot of money," a hedge fund manager, who asked not to be identified, said.

However, the board could still have some "limited influence over the general market, especially in terms of investor sentiment," Yu said.

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