China's stock market is likely to remain bullish for the rest of
the year, according to participants at a forum of the Chinese
Academy of Social Sciences (CASS).
Wang Guogang and He Xuqiang, researchers with the CASS Institute
of Finance and Banking, released their report on the capital market
at the forum, which took place in Beijing on Friday.
Their report was published in the CASS quarterly Blue Book on
the Chinese economy, one of the longest in the collection of 12
research papers.
Also on Friday, the Shanghai Composite Index shot up by 3.9
percent (or 135 points) to 3,584 points, despite two major falls
since the beginning of the year one on February 27 and the other on
Thursday in anticipation of central government concern that the
economy may be overheating.
But despite the increasing likelihood of Beijing introducing
more measures to slow GDP growth (11.1 percent per annum), general
economic conditions will remain favorable to investors, the two
CASS economists said.
As the government pursues "good and fast" economic growth,
Chinese listed companies are more likely to see high profits,
providing solid support for their stock prices, Wang and He said.
Their view was shared by fellow CASS economists Li Yang and Peng
Xingyun in their joint report on the financial system.
The market is awash with capital and the excess liquidity is
unlikely to be significantly reduced despite the central
government's attempt to slow down growth, they said.
In the meantime, the renminbi revaluation process will continue
and international investors will see a double incentive to pursue
the domestic A-share market.
But the researchers acknowledged risks still exist for
investors, with the price-to-earnings ratio of the Chinese market
hitting 40 much higher than the average level of other stock
markets.
?
Chinese investors seem undeterred. The nation's new stock trading
accounts exceeded 90 million on Thursday, according to the China
Securities Depository and Clearing Co Ltd. This number is about 7
percent of China's population.
On Thursday alone, 634,000 new investors rushed to stockbrokers
to open accounts. The previous day, 345,000 accounts were opened.
So far this year 11.7 million new accounts have been opened, more
than double the number for 2006.
(China Daily April 21, 2007)