Share prices of beleaguered coal and steel companies surged on Wednesday after Premier Li Keqiang vowed steps to cut overcapacity and overcome nagging problems.
Shares of coal mining companies such as Datong Coal Industry Co Ltd, Shanxi Coal International Energy Group Co Ltd and Shaanxi Coal Industry Co Ltd all soared by the daily limit of 10 percent after Premier Li's visit to a coal mine in Taiyuan, capital of Shanxi province. During his visit, the premier emphasized the urgent need for an industrial upgrade.
The coal mining industry has been reeling from oversupply and falling prices, with the global market not offering much comfort either.
"But we need to have confidence that coal mining will still be the country's major industry. The difficulties will eventually be conquered," said Li during his two-day visit to Shanxi, the country's coal hub in the north.
His remarks helped buoy investor sentiment not only for the coal mining industry but also for the steel and nonferrous metal sectors.
Stocks in the steel and smelting and processing of nonferrous metals sectors surged about 7.8 percent and 5.1 percent, respectively, on the A-share market.
Zhang Yidong, a senior analyst with Industrial Securities Co, said the rebound is not out of expectations, but has more of a cyclical nature. It is time for industries such as coal mining and steel, which have nearly hit rock bottom, to rebound, he said.
"I think it is a good time for investors dabbling in cyclical businesses as the 'selling off' is about to complete but has not finished yet," he said.
Experts said that the country is determined to deal with the current overcapacity problem along with expectations that excessive production will be absorbed eventually.
Since 2012, many industries in China have been struggling with a supply glut amid a sluggish economy. Last year, Longmay Mining Holding Group Co, the largest coal mining company in Northeast China, cut more than 100,000 jobs to reduce losses.
