Index up 1.1% on hopes for China pick-up
TALK that China is planning to do more to boost economic activity lifted the market yesterday as traders reassessed their positions on the prospect for growth in the world's second-biggest economy.
TALK that China is planning to do more to boost economic activity lifted the market yesterday as traders reassessed their positions on the prospect for growth in the world's second-biggest economy.Resource and energy stocks were swept up inthe buying, lifting the benchmark index to its highest in a week.The S&P/ASX 200 put on 46.4 points, or 1.1 per cent, to 4114.4.After three straight weeks of falls, the market has now risen 2.1 per cent in two days.Shares in Fortescue Metals surged for a second day as talk that China would restart some infrastructure projects forced short-sellers to cover their positions.Fortescue, which has been targeted by renowned short-seller Jim Chanos in recent months, rose 34?, or 7.5 per cent, to $4.89 after rising 24? on Monday.BHP Billiton rose 32? to $32.37 and Rio Tinto surged $1.24 at $58.14.SG Hiscock portfolio manager Rob Tucker said traders who had been bearish on China were seriously reassessing things, after report that the Chinese government planned to boost activity.The rally in resource stocks was a reminder that the market had been hit by a double whammy in the past few weeks, he said, as fears about the euro debt crisis fed concerns about Chinese growth."That helped accelerate the negative view on China, with shorting of China-linked stocks widespread," Mr Tucker said."We have had a very long-term structural view on China, which has been positive. In the last six to12 months we've become more cautious, because China's steel mills still have a lot of inventory to work through, so we're not reacting to this news today of further stimulus measures just yet."Shaw Stockbroking senior dealer Jamie Spiteri said stocks had been oversold in recent weeks, and traders were starting to look at the fundamentals more closely."Despite the fact that markets have been very skittish and volatile, there comes a point where you've got to assess the risk profile of present prices and recognise that most of our large corporates have had their share prices discounted in comparison to present and forecast earnings," he said.The big banks all moved ahead. Westpac rose 15? to $20.55, NAB 16? to $23.81, Commonwealth 60? to $49.88 and ANZ 36? to $20.94.Suncorp gained 13? to $7.81 after it said its insurance business was improving, though other areas of the business would take longer to meet growth targets.