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China Stocks Are Expected to Be Rangebound

Cheng Lei|Reporter, CNBC Asia Pacific
Monday, 21 May 2012 | 7:19 PM ET

China stocks are expected to be rangebound on Tuesday. The Shanghai Composite nudged up 0.16 percent to end at 2348.3 on Monday, trading was thin.

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Market Factors:

Securities regulators issue amendments to IPO rules to improve disclosure and enhance fairness. Some key changes include adopting a "quiet period" pre-IPO, allowing issuers to determine the issue price with the underwriter directly.

Sentiment is likely to be supported by Chinese media reports that the national pension fund may be allowed to invest up to 30 percent of their assets in A-shares, which would be an estimated 580 billion yuan.

Stocks to watch:

Railway Related Stocks

More reforms for the sector. Ministry of Railways will no longer decide on project tenders but will ask all suppliers to bid through the local governments' public resources auction centres, in a bid to wipe out corruption. In the past, big names like China Railway Construction have almost always been able to win tenders.

Guangzhou Pharma

The drugmaker's parent group unveiled the strategy for its newly acquired Wanglaoji herbal tea brand, setting an annual sales target of 30 billion yuan within five years.

Property Stocks

Liang Xiaoqing, an official at the Ministry of Housing and Urban-Rural Development says the rebate incentive scheme announced two weeks ago in Yangzhou is not against the spirit of Beijing's property curbs — it's the first official confirmation that such incentives are encouraged by the central government.

—By Cheng Lei, CNBC Asia Pacific