Big winners in China's stock market boom
BEIJING - 2014 was the Year of the Bull in China's stock market as the main index surged 54 percent, buoyed by hopes Beijing will do more to reverse a slowdown in the world's second-largest economy.
A rally that began in June has been supported by easier credit to finance trading and cheerleading from the state press, which says China needs active stock markets to make the economy more productive. More recently, it was bolstered by an interest rate cut and official moves to permit banks to lend more.
Small investors have been burned when past booms in China's volatile markets soured. This time, positive comments by state media feed hopes Beijing will shore up prices if needed. Still, analysts warn the latest rally might be unsustainable.
"It has nothing to do with basic conditions of companies or industries," said market strategist Xu Xiaoyu at China Investment Securities.
Small stocks have seen the biggest gains but the rise in the overall market has been driven by big state-owned companies that account for the bulk of the benchmark Shanghai Composite Index.
Everbright Securities Ltd.
Everbright is one of China's biggest stock brokerages, and its share price soared 232 percent in 2014 as the trading frenzy boosted revenue and profit for the state-owned securities industry. The number of new trading accounts opened nationwide soared to 179,700 a day in December, up from November's daily average of 97,000, according to the Chinese securities regulator. The average in early 2014 was 29,000.
China Construction Bank Ltd.
No. 3 among the "big four" state-owned commercial lenders, Construction Bank rose 64.5 percent, a modest gain compared with smaller stocks but one that added tens of billions of dollars to the value of one of China's biggest companies. The profit outlook for banks has been boosted by a steady flow of regulatory changes aimed at making the state-owned industry more market-oriented by easing controls on interest rates and encouraging institutions to lend more to entrepreneurs and to compete for deposits and other business. Shares rose when regulators unveiled plans for deposit insurance and again when a state news agency said in December banks will be allowed to lend more in an effort to boost economic growth.
Sinopec Ltd.
Sinopec, also known as China Petroleum & Chemical Corp., is Asia's biggest oil refiner by volume. It rose 46.5 percent despite an anti-corruption campaign that has snared executives in the state-owned oil industry. The share price reflected the paradox of China's market boom. It rose even after Sinopec's first-half profit fell 12 percent from a year earlier and analysts forecast weaker demand for its oil, gas and petrochemicals.
China Power Construction Corp.
Also known as PowerChina, the company owns Sinohydro, the world's biggest builder of hydroelectric dams. PowerChina's stock rose 177 percent in 2014. State-owned construction companies have benefited from Beijing's effort, backed by credit from government banks, to secure more contracts for them from Africa, Latin America and developing Asian economies.
Small-cap stocks
Small companies, especially those seen as potential takeover targets, recorded stunning increases. Their market values are too small to affect the index, but investors who bought early saw huge gains.
Fushun Special Steel Co., which makes steel, titanium and other products for the auto and electronics industries, topped the list of gainers, with its shares soaring 387 percent in 2014.
Guangxi Beisheng Pharmaceutical Co. gained 288.9 percent. Ledman Optoelectronic Co., a maker of optical-electronic equipment, rose 283 percent.