Business

Sun Jun 01 21:56:48 PDT 2008

(for Hong Kong stock market reports, click [.HK])

SHANGHAI, June 2 (Reuters) – China’s main stock index rose on Monday, led for a second straight day by power producers and oil refiners amid speculation that the government might soon allow domestic electricity charges and gasoline prices to rise.

The benchmark Shanghai Composite Index <.SSEC> ended the morning up 0.57 percent at 3,452.835 points, less than a point off its intra-day high.

Losing stocks in Shanghai marginally outnumbered gainers by 444 to 443, while turnover in Shanghai A shares shrank to a very thin 29.8 billion yuan ($4.3 billion) from Friday morning’s 31.2 billion yuan.

Huaneng Power <600011.SS> surged 5.46 percent to 11.01 yuan after gaining 8.41 percent on Friday, while top oil refiner Sinopec <600028.SS> rose 2.66 percent to 13.89 yuan after Friday’s climb of 3.12 percent.

Traders reported talk in the market that to ease pressure on the bottom lines of power producers and refiners, and to curb excessive energy use, authorities would permit those companies to raise prices — though so far there has been no clear sign that the government will do this, especially with inflation near 11-year highs.

One potential negative for the market was news at the weekened that China Construction Corp, a big home builder controlled by the central government, had applied to list in Shanghai. Its application will be considered by the securities regulator on Thursday.

The IPO of up to 12 billion A shares could raise over 42 billion yuan, the official Securities Times reported. That would make it China’s largest domestic IPO this year and the fifth biggest ever, straining the weak market’s ability to absorb the fresh equity.

"This is kind of a surprise, that officials are approving such a huge IPO in a market where confidence is weak. It’s why turnover has shrunk to such pitiful level," said Wu Nan, analyst at Xiangcai Securities. ($1 = 6.93 yuan)

(Reporting by Claire Zhang; Editing by Andrew Torchia)

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