Paper mills’ share prices rise

Stocks of Chinese major paper mills continued to rise on Wednesday, as analysts remarked about the good prospects for the industry.

Shares of Shan Dong Sun Paper Industry Joint Stock Co Ltd, one of the largest paper mills by both revenue and profit, increased by 3.29 percent to 6.9 yuan (99 cents), and the shares of Shandong Chenming Paper Holdings Ltd closed 1.31 percent higher.

The benchmark Shanghai Composite Index closed at 3,158.79 on the same day, up 0.73 percent.

The rally was thanks to the rising prices of paper products, after the government put forward the supply-side reform which places priority on cutting excessive capacity, and restricted some manufacturers’ output in order to alleviate environment pollution this winter, according to Jie Li, an analyst at Sinolink securities.

“Soaring costs in raw materials and freight charges” also shored up the prices, wrote Jie in a research note on Tuesday.

He added that this round of price increases in paper products was reasonable.

Looking at the trend in rising paper prices, some analysts were bullish on the sector’s future performance, despite some stocks having retreated in past weeks.

GF Securities analysts Shen Ye and Zhao Zhongping predicted, in a research note released last December, that the profitability of the industry was expected to rise since both the supply-demand equation and competition patterns were better than market expectations.

Bank of China’s Investment Banking Group maintained a “buy” rating on the paper sector this week, according to its research note issued on Wednesday.