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Chinese cement shares rise as government plans for social housing are revealed

World Cement,

During the most recent annual parliamentary session, Premier Wen Jiabao promised increased spending and focus on public housing, in an attempt to offset criticisms over the escalating housing costs. CIMB Research analyst Gary Cheng in Hong Kong, comments that the news on subsidised housing “will lift demand for cement.” However, the catalyst driving cement shares may subside as the parliamentary meetings come to an end warned Cheng, as speculative investors may simply wish to take the profit after such significant gains.

Following the parliamentary session, one of the largest cement manufacturers, China National Building Material Co. Ltd saw an increase of 5.6%, and Anhui Conch Cement Co. Ltd leapt up by 4%. Even the Hang Seng Index in Hong Kong rose by 0.5%.

Investors were not as keen in Shanghai, as they were with the Hong Kong counterparts. Anhui Conch Cement, valued at ¥98 billion, saw a loss of 0.73%. Similarly, Tangshan Jidong Cement Co. Ltd, with its market capitalisation of ¥32.6 billion, fell by 2%.

On the mainland, cement shares have soared over the past six months; with Anhui Conch leading the way with a 52% increase. Tangshan Jidong follows behind with a 19% gain. Even the smaller businesses have witnessed growth, with Huaxin Cement Co. Ltd more than doubling its share price during this period, and most recently gaining an extra 1.12%. The Shanghai Composite Index has seen an increase of 11% over the past six months, with a minor 0.14% setback most recently.

Analysts are reporting that cement concerns are likely to continue to appeal on a long-term basis as China implements its new housing construction promise. The cement companies are likely to see improved profits as a result. Danny Yan from Haitong International Asset Management Ltd, remarks “the cement industry has historically suffered from overcapacity but China raising the threshold for the cement industry is likely to eliminate this excess capacity.”

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