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DJ China Shares End Up; Banks Lead Following PBOC Cash Injection
December 23, 2013

SHANGHAI--China's shares reversed nine consecutive sessions of declines to end higher Monday, led by heavyweight banks that received billions of dollars of cash from the central bank last week. But analysts said the gains could fizzle out soon, due to a lack of fresh fund inflows and strong demand for cash toward the end of the year. The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 0.2%, or 4.92 points, at 2089.71. It lost nearly 7% in the previous nine sessions. The smaller Shenzhen Composite Index inched 0.1% lower to 1025.58. "It's just a technical rebound," said Soochow Securities analyst Deng Wenyuan. "Stocks look less attractive than short-term wealth management products sold by banks at higher yields. Without fresh funds flowing into the stock market, the gains will fizzle out soon," he said. Banks were among the day's big gainers after sharp declines last week amid tight liquidity. China Construction Bank gained 5.3% to CNY4.17, Bank of Communications rose 2.1% to CNY3.94 and China Citic Bank added 5.6% to CNY3.78. Still, trading interest in the overall market remained tepid, said analysts. Trading volume for the Shanghai and Shenzhen stock exchanges fell to CNY131.94 billion ($21.7 billion) from CNY153.55 billion Friday. "The market is clouded by concerns of a liquidity crunch," said Amy Lin, an analyst at Capital Securities. "Sharp rises in stock indexes are unlikely in the coming month. All eyes are on the central bank now, with hopes it could continue to inject funds into the market," said Ms. Lin. Borrowing costs in China's money market soared again Monday afternoon following a brief fall earlier in the session, despite the PBOC's cash injection. The People's Bank of China said late Friday that it had injected over 300 billion yuan ($49.3 billion) into the financial system over a three-day period. Mr. Deng said many investors are starting to build funds for initial public offerings, which will likely resume early next year following a year-long halt. "Usually new shares can rise at least 20% on the first day of trading. That's another (piece of) bad news for existing stocks," he said. Media companies were mostly lower on profit-taking. Huayi Brothers tumbled by the 10% daily limit to CNY27.41, after a 4.9% gain on Friday. Guangdong Alpha Animation fell 6.0% to CNY29.48, following a 1.3% rise in the previous session. Write to Rose Yu at rose.yu@dowjones.com