| Chinese shares rise on stronger yuan, hitting new five-year high |
SHANGHAI, Nov. 23 (AP) -- Chinese share prices surged Thursday as strength in the Chinese currency boosted heavyweight banks, pushing the key Shanghai index to a seventh straight five-year high. The yuan rose against the U.S. dollar.
The Shanghai Composite Index gained 1 percent to 2,062.36, its highest closing level since July 27, 2001, when it ended at 2,065.72. The Shenzhen Composite Index edged up 0.4 percent to 465.50.
"Many newly established funds are building positions now," said Zhang Qi, an analyst at Haitong Securities. "They believe it's better to buy stocks earlier rather than later in a bull market."
Banks rose after the yuan hit a fresh high against the U.S. dollar on the over-the-counter market during the day. A stronger local currency is expected to boost the value of banks' large yuan-denominated assets, analysts said.
Industrial & Commercial Bank of China, the largest capitalized stock on the mainland, rose 1.8 percent to close at 3.97 yuan, and Bank of China, the second largest, advanced 1.9 percent to 3.75.
ICBC had gained 12.7 percent in the past eight sessions and BOC had added 9.5 percent over the same period, outpacing the Shanghai benchmark's 8.4 percent rise.
Some smaller banks gained even more, with Hua Xia Bank surging 6.9 percent Thursday to 6.37 and China Minsheng Banking rising 2.4 percent to 7.27.
The Shanghai index has gained 78 percent in value since the beginning of the year and many stocks, including banks, are already fairly valued or even overpriced, but investors are still willing to buy on the belief that a long-term rally has set in, said Zhou Lin, an analyst at Huatai Securities.
"It seems many traders won't restrain from aggressive investments until the market gets some bubbles," Zhou said.
"When the benchmark index was around 1,000 last year, few people dared to buy stocks. But as the market warms up, with the index breaking 2,000 lately, people are becoming optimistic," said Haitong's Zhang. "This is human psychology."
In currency dealings, the U.S. dollar's decline against other currencies pushed the yuan to a fresh high level.
On the over-the-counter market, the dollar was at 7.8606 around 0740 GMT, down from Wednesday's close of 7.8647.
The central bank's official opening rate for the yuan, at 7.8596 was its highest level since China set up its current foreign exchange system in July 2005.
The dollar was at 7.8596 on the automatic price matching system late Thursday, after hitting a record low of 7.8560 earlier in the day.
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