China shares rise to almost 5-year high

Despite a notable economic slowdown in 2014, the Chinese stock markets staged an extraordinary rally with the key index jumping 53 percent this year.

Chinese shares, which had been bearish for about six years, rose in the second half of 2014 and created a bull run amid huge daily turnover.

China's promise to deepen reforms and open up further, government's supportive measures for the capital market, Shanghai-Hong Kong stock connect program, and interest rates cut had all contributed to the rally, analysts said.

5-YEAR HIGH

On Wednesday, the last trading day of 2014, Chinese shares continued to gain with the key Shanghai Composite Index rising to a nearly 5-year high.

The Shanghai index soared 2.18 percent to close at 3,234.68 points, the highest level since Jan. 20, 2010 when it ended at 3,151.85 points. For the entire 2014, the index jumped 52.87 percent, or 1,118.7 points, which was the biggest annual gain since 2010.

The smaller Shenzhen Component Index closed at 11,014.62 points, up 2.73 percent. For 2014, the Shenzhen index advanced 2,892.83 points, or 35.6 percent.

On the last trading day, gainers outnumbered losers by 662 to 231 in Shanghai, and by 1,039 to 360 in Shenzhen. Total turnover on the two bourses shrank to 655.13 billion yuan (107.06 billion U.S. dollars) from Tuesday's 669.11 billion yuan.

Property developers, banks, securities firms and companies related to China's high-speed railway programs led the charge.

The property sub-index advanced 3.1 percent, with 10 firms rising by the daily limit of 10 percent, including China Vanke, Poly Real Estate Development, Gemdale Corporation and China Merchants Property Development.

Banks and securities firms, which were the main gainers behind the rise of Chinese shares in the past several months, continued to advance in the day.

Bank heavyweights, including the country's big four lenders, outperformed smaller banks. Bank of China soared 5.3 percent to end at 4.15 yuan per share. ICBC, China's largest bank by market value, rose 3.4 percent to end at 4.87 yuan.

China Construction Bank gained 2.44 percent, and the Agricultural Bank of China rose 4.8 percent. China Merchants Bank was the best-performing among all banks, gaining 5.8 percent.

Shares of China's top two bullet train makers -- China CNR Corp. Ltd. and the CSR Corp. Ltd. -- both jumped by the daily limit of 10 percent on Wednesday, the first trading day after more than two months of trading suspension.

Nuclear firms were also strong, on news that China will soon restart construction of nuclear power plants in coastal regions. Shanghai Electric surged by the daily limit of 10 percent, while Dongfang Electric Corp. jumped 7.33 percent.

BIG RALLY IN 2014

The Chinese stock markets were the most bullish globally thanks to gains in the second half and a huge daily turnover that drew attention from investors, said Qiu Yanying, investment director of China Fortune Securities Co. Ltd.

The year 2014 could be separated into two very different halves for the Chinese stock markets.

In the first half, the stock markets continued to be bearish with small daily turnover. Many investors had low confidence and they preferred small-cap stocks rather than blue chips, Qiu said.

Ai Tangming, a Beijing-based stock market analyst, agreed. "In the first half, the Shanghai index fell to below the 2,000-point psychological mark several times, and investors felt desperate after years of bearish markets," he said.

In the second half, the market sentiment was completely turned to optimism amid a bull run, thanks to soaring of blue chips, especially securities firms, banks and insurers.

Compared with the closing of 2,048 points on June 30, the key Shanghai index added 1,186 points, or 58 percent, in the second half.

On Dec. 5, turnover on the Shanghai and Shenzhen bourses totaled 1.07 trillion yuan, a new world record for daily turnover, which broke a previous high of 914.9 billion yuan only two days ago.

Figures from the China Securities Regulatory Commission (CSRC), the country's securities watchdog, showed that 2,603 companies had been listed on the two bourses as of Dec. 23, with a combined market capitalization of 35.4 trillion yuan, overtaking Japan as the world's second largest after the United States.

Qiu attributed the bull run in the second half to three reasons -- the guiding principles of regulations for the capital market in coming years issued by the State Council (cabinet) on May 9, the launch of the Shanghai-Hong Kong stock connect pilot program in November and the interest rates cut on Nov. 22 by the central bank.

Looking ahead in 2015, Ai Tangming said he was upbeat.

"The market could be as good as in 2014, and opportunities for investors could be no less than this year," he said.

On one hand, China's economic growth is bottoming out thanks to government's reform and growth-supportive measures, and the "Belt and Road Initiatives" which aim to revive the ancient Silk Road from China via Central Asia and Russia to Europe and the Silk Road Economic Belt.

On the other hand, ample capital has poured into the stock markets, evidenced by the huge daily turnover, and it is the core factor for the bullish market, Ai said.

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