July 9 (Reuters) – China’s key stock index closed 2.3 percent higher on Friday as cash tied up by Agricultural Bank of China’s [ABC.UL] mega IPO returned to the market, while institutions bought up banks and property issues.
Dealers attributed the buying of blue chip stocks to window-dressing ahead of the listing of AgBank next week.
Trading remained cautious after a 25 percent market slump this year battered investor confidence, with traders predicting the index may not easily breach the psychologically important 2,500-point barrier.
The Shanghai Composite Index .SSEC closed at 2,471 points, winding up the week with a gain of 3.7 percent and reversing a 6.7 percent loss last week amid the peak of fund demand for AgBank’s stock initial public offering.
The Shanghai portion of AgBank’s IPO had frozen nearly 500 billion yuan ($74 billion) in subscription funds, and the money for failed subscriptions would all be returned by Friday. The bank will be listed in Shanghai and Hong Kong next week.
Despite Friday’s gain, the index is still one of the world’s worst performers so far this year, hit by a slew of negative factors including Beijing’s campaign to cool the property market and worries over a slowdown of China’s economic recovery amid the euro zone debt crisis.
“I believe institutional investors are doing some window-dressing buying ahead of the AgBank listing,” said a senior trader at a major Chinese brokerage. “But the market should pull back late next week after the AgBank listing.”
China State Construction Engineering Co (601668.SS), the country’s top developer and construction firm, was the day’s most active stock, rising 1.9 percent, while Minsheng Bank (600016.SS), another active stock, closed up 2.8 percent. ($1=6.77 yuan) (Reporting by Lu Jianxin and Jacqueline Wong)