December 25, 2006 5:33 AM ET China Life Helps Lift China Stocks
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SHANGHAI, China (AP) - Heavyweight banks jumped Monday in a spillover effect from hopes that China Life Insurance will make a strong debut in January, pushing the benchmark Shanghai Composite above the 2,400 level to another closing high.
In the forex spot market, a rise in the U.S. dollar-yuan central parity rate pushed the Chinese unit lower in thin trading, as many markets internationally are closed for Christmas.
On the over-the-counter market, the dollar was at 7.8195 yuan at about 0720 GMT, up from Friday's close of 7.8163 yuan. It traded in a tight range of 7.8185 to 7.8210 yuan.
The composite index, which tracks both A and B shares, ended up 3.9 percent at 2,435.76. It rose as much as 4.6 percent during the day but profit-taking pared some of the gains.
The Shenzhen Composite Index advanced 1.5 percent to 543.42.
The China Life effect will continue to support the overall market in coming days, but profit-taking risks are high and rising after the benchmark index has more than doubled this year, analysts said.
China Life, China's biggest life insurer by premiums, said overnight it set an indicative price range of 18.16 yuan to 18.88 yuan for its initial public offering of up to 1.5 billion A shares.
"Investors had expected the IPO shares to be priced above 20 yuan since China Life is set to be the first insurer to float shares on the domestic market," said Li Shiming, an analyst at Galaxy Securities.
"The lower-than-expected price range gives China Life more room to rise when it debuts in Shanghai. Investors widely expect its A shares to trade at a premium to its H shares considering the yuan's long-term strength," said Xu Yinghui, an analyst at Guotai Junan Securities.
China Life, which has H shares listed in Hong Kong and American Depositary Receipts traded in the U.S., closed at HK$24.35 on the Hong Kong market Friday, 29 percent to 34 percent higher than the A-share IPO price range.
The company has said it expects to list on the Shanghai Stock Exchange by Jan. 11.
Large banks rose Monday, benefiting from an overflow effect from China Life's IPO news. Industrial & Commercial Bank of China surged 9.9 percent to a record close and Bank of China jumped 7.5 percent to its highest settlement level since it listed in July.
"China Life and the two banks are comparable in some ways. They all possess leading positions in their respective industries and are direct beneficiaries of China's economic boom," Li said.
ICBC and BOC's gains buoyed other financial companies. China Minsheng Banking rose 5 percent and CITIC Securities gained 4.4 percent.
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