Many sellers of home appliances may be slashing prices to clear rising inventories. But it's a different picture in rural areas, where recently-launched subsidies for farmers are sending items flying off the shelves. And that's given a big boost to stocks in certain companies and the overall benchmark index in Shanghai. We'll have more details of the week's market action later in the program.
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Home appliance stocks were a big factor in the week's surge in the Shanghai Composite. |
Home appliance stocks were a big factor in the week's surge in the Shanghai Composite. Just 2 weeks ago, the government launched subsidies for farmers buying certain models of household appliances in rural areas, as one way to stimulate consumption. That's led to a close-to 15 percent jump in stocks for the sector in the past week. Some leading firms like Changhong, Midea and Little Swan surged more than 20 percent in five trading days.
Huang Xiangbin, Analyst of Cinda Securities said "The government is promoting the rural market as the next focus of domestic consumption, as it understands how large the rural market can be, if it's possible to tap its potential. And with home appliance manufacturers now getting subsidies, it's easy to understand why stock investors have favored them in the past week."
Analysts say that despite sharp drops in overseas demand, China's rural market should be able to absorb excess production of home appliances. But investors are warning companies that they must shift their focus to rural areas in the long term if they want enjoy growth that also stretches into the longer term.
(CCTV December 8, 2008)
