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By Tony Tassell in London and David Turner in Tokyo The Shanghai Composite rose 4.7 per cent to 2,794.70 as investors shrugged off concerns that the Chinese share market might be overheating following steep rises in 2006 and so far this year. The rally was partly spurred by expectations of further appreciation of the renminbi and led by property stocks. The renminbi-denominated stocks in the Shanghai A share index rose 4.73 per cent to 2,935.53 while the B share index for stocks listed in dollars was up 6.9 per cent to 169.47. The A share index has firmed 4.28 per cent so far this year while the B share index has soared 30.25 per cent. It was a similar story on the smaller Shenzhen exchange where the A share index gained 6.25 per cent to 8,018.31 and the B share index, for shares quoted in Hong Kong dollars, rose 5.42 per cent to 511.77. The Shenzhen A share index has jumped 14.88 per cent so far this year, while the B share index gained 18.1 per cent. China Life Insurance jumped 10 per cent, the maximum allowed in one day, to Rmb43.45 after a domestic news service reported company officials disclosing strong insurance income growth. Industrial and Commercial Bank of China rallied 4.5 per cent to Rmb5.57 after heavy losses last week. Oussama Himani, head of emerging market strategy at UBS, said A shares were trading at levels that could only be justified by “very optimistic” earnings growth expectations. He said earnings of A share companies would have to double this year to justify current levels. UBS estimates that the A share index is trading on a price/earnings multiple of 22 times, based on forecast profit growth this year of 27 per cent.
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