The China stock market has alternated between positive and negative finishes through the last six trading days since the end of the four-day slide in which it had retreated more than 60 points or 2.9 percent. Now at a 41-week closing low, the Shanghai Composite Index finished just above the 2,090-point plateau, and now analysts are predicting renewed support at the opening of trade on Monday.
The global forecast for the Asian markets suggests bargain hunting after heavy damage last week, thanks to encouraging reports from the European Central bank and the U.S. Federal Reserve. The European and U.S. markets finished firmly higher on Friday, and the Asian bourses are expected to open in similar fashion.
The SCI finished sharply lower on Friday following losses from the oil companies and the coal miners.
For the day, the index plunged 20.97 points or 0.99 percent to finish at 2,092.10 after trading between 2,089.22 and 2,109.82. The Shenzhen Composite Index plummeted 17.90 points or 2.0 percent to end at 871.36.
Among the decliners, PetroChina dipped 0.3 percent, while Sinopec lost 0.8 percent, Shanxi Xishan Coal and Electricity Power dropped 4.1 percent and China Shenhua Energy fell 1.7 percent.
The lead from Wall Street is positive as stocks showed a substantial turnaround on Friday after moving lower in early trading. The markets benefited from a positive reaction to the latest reports regarding the world's central banks, which indicated that the European Central Bank is considering setting yield band targets under a new bond-buying program.
Setting a band is an option gaining in favor among central bankers, but the decision would not be made before the ECB's next monetary policy meeting on September 6.
Buying interest was also generated by news of a letter Federal Reserve Chairman Ben Bernanke sent to Rep. Darrell Issa, R-Calif., defending the Fed's actions to support the economy. In the letter, which was obtained by the Wall Street Journal, Bernanke also told Issa there is "scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery."
The early weakness followed the Commerce Department's report on durable goods orders in of July. While the report showed a much bigger than expected increase in durable goods orders, the increase was largely due to strength in the volatile transportation sector. The report also showed a continued decrease by a key indicator of business spending.
Traders also remained leery about the situation in Europe, where Greek Prime Minister Antonis Samaras held a meeting with Chancellor Angela Merkel. Samaras pledged that Greece will "stick to its commitments and fulfill its obligations" but noted that the debt-plagued nation needs "time to breathe" as it undertakes crucial reforms. Merkel did not immediately respond to the request for more time to implement reforms but stressed that Germany wants to help Greece remain in the eurozone.
The major U.S. averages moved roughly sideways going into the close, ending the Friday firmly in positive territory. The Dow jumped 100.51 points or 0.8 percent to finish at 13,157.97, while the NASDAQ rose 16.39 points or 0.5 percent to end at 3,069.79 and the S&P 500 advanced 9.05 points or 0.7 percent to close at 1,411.13. Despite the gains on the day, the major averages all moved lower for the week. The Dow fell by 0.9 percent, while the NASDAQ and the S&P 500 slid by 0.2 percent and 0.5 percent, respectively.
In economic news, China is on Monday scheduled to release year-to-date figures through July for industrial profits. Profits were down 2.2 percent on year in June.
In corporate news, China Petroleum and Chemical Corp. (Sinopec) on Sunday reported a sharp decline in profit for the first half, despite about 9 percent increase in turnover and other operating revenues. However, the company sees domestic demand for refined oil products and chemicals to steadily increase in the second half. On an IFRS basis, net profit attributable to shareholders of the company dropped to 24.5 billion Chinese yuan from 41.17 billion yuan in the previous year. On a per share basis, earnings were 0.272 yuan, down from 0.462 yuan in the prior year.
Sinopec, Asia's top refiner, said its operating profit decreased by 31.4 percent to 40.08 billion yuan. In the first half of 2012, the company's turnover and other operating revenues increased 9.3 percent to 1.35 trillion yuan.
Also, Chinese Aluminum producer Aluminum Corporation of China Limited (Chalco) on Saturday reported a loss for the first six months of the year compared to a profit last year. The company attributed 51 percent increase financial expenses, falling market prices and higher costs of raw materials to the loss.
Chalco, a unit of Aluminum Corporation of China (Chinalco) recorded a net loss 3.25 billion yuan or $513.39 million for the first six months, compared to a profit of 413 million yuan a year ago. On a per share basis, loss for the first half was 0.24 yuan.
Revenues were up 8.7 percent to 71.7 billion yuan in the first six months of the year. The company noted that its financial expenses were increased 51.4 percent year on year to 2.3 billion yuan in the first six months.
by RTT Staff Writer
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