Shanghai shares will likely edge lower early this week after
China's central bank raised interest rates yesterday, adding
jitters about higher borrowing costs.
But analysts said the key equity index may again test the
psychologically-important 3,000-point level, with the market
hinging on the performances of blue chips.
They said liquidity is abundant as a slew of mutual funds are
expected to build positions. But wide fluctuations may continue as
profit taking has yet to end.
The Shanghai Composite Index lost 0.72 percent on Friday to
close at 2,930.48, giving the gauge a loss of 0.25 percent for the
week.
"The interest-rate hike provides investors another excuse to
take profits," said Lu Chengde, a Guosen Securities Co trader. "But
I don't think it will have a long-term impact. Yet the move could
make it harder for the index to hold above 3,000."
The People's Bank of China yesterday lifted the one-year lending
rate 0.27 percentage points to 6.39 percent in a bid to ease
inflationary pressures.
The Shanghai Composite Index has twice risen above the
3,000-point level this year, only to dip below shortly after. The
index plunged 8.84 percent on February 27, the steepest one-day
loss in a decade, after it closed at 3,040.60 a day earlier.
"This time, we'd like to pay close attention to the stock
movements of large-caps," said Zhu Wenlin, a Guohai Securities Co
trader. "The question will be whether recent weak performances by
these shares can come to an end."
Ping An Insurance Group Co, China's No. 2 life insurer, joined
the index on Thursday, when it inched up 0.04 percent. On Friday,
the shares rose 0.53 percent to 45.20 yuan (US$5.84), helping
steady the market.
The index in Shanghai will likely fluctuate in a range between
2,800 and 3,050 points this week, according to Beijing Shoufang
Investment Consulting Co.
The consultancy advised investors to avoid chasing chips with
hefty gains of late and look for bargains among companies with
solid growth fundamentals.
"We've noticed there's capital flowing out of the market, but
we've also seen money from funds ease the market dips," said
Shoufang in a note to clients. "We believe it might work better to
snap up blue chips now as they may lead the market higher in coming
sessions."
(Shanghai Daily March 19, 2007)