- The Washington Times - Wednesday, March 21, 2007

SHANGHAI (AP) — Chinese stocks rose to a record yesterday, marking a complete recovery from their late-February swoon that sparked a sell-off in global financial markets.

Gains in real-estate stocks lifted the benchmark Shanghai Composite Index 0.8 percent to 3,057.38, breaking the previous closing high set Feb. 26, a day before it plunged nearly 9 percent. That drop sparked declines in New York, London and through much of Asia for about a week.

The key index on China’s smaller market in Shenzhen rose 1.4 percent to 805.68, also a record high.

Analysts said they expect further gains in the near-term for the market, although “gains won’t come as easily as before,” said Tang Xiaosheng, an analyst at Guosen Securities.

“The blue chips’ valuations are no longer attractive after recent rises and many investors would wait for their first-quarter earnings for trading clues,” Mr. Tang said.

Listed firms generally publish their quarterly results in April and May.

Real-estate companies rallied amid speculation that the central bank will raise yuan rates at a quicker pace after Gov. Zhou Xiaochuan said China doesn’t intend to build more foreign exchange reserves.

In an interview with the EmergingMarkets newspaper distributed Tuesday at a meeting in Guatemala City, Mr. Zhou was quoted as saying China’s monetary authority doesn’t “intend to go further and accumulate [foreign] reserves.” He added that “many people say that foreign exchange reserves in China are [already] large enough.”

It wasn’t clear how China might limit its currency reserves, which total more than $1 trillion, and are rising around $20 billion a month.

Mr. Zhou was in Guatemala’s capital for the annual Inter-American Development Bank meeting.

Property companies rank stand to benefit from a stronger yuan because their land and property holdings are denominated in local currency, analysts said.

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