Concerns of a possible rise in interest rates will hover over
Shanghai's stock market this week, while all eyes may be on the
index's movements especially after heavyweight PetroChina is
included in the benchmark barometer today.
Investors have been expecting an immediate rise in interest
rates after strong data released last week showed that national
inflation and urban fixed asset investment have accelerated. The
Shanghai Composite Index ended last week basically flat at
5,316.27. It only rose on Wednesday and fell on the other four
trading days.
China's consumer prices added 6.5 percent in October year on
year, matching a decade high seen in August, while its urban
fixed-asset investment in the first 10 months climbed 26.9 percent,
against a 26.4-percent rise through September, the National Bureau
of Statistics reported last week.
"All the figures are telling that a rate hike is something we
just cannot avoid, it's only a matter of time," Golden Sun
Securities analyst Wang Jian wrote in a note. "The impact of a rate
rise on the market is becoming increasingly likely after several
hikes this year."
China's central bank has raised the benchmark interest rate five
times this year and the reserve ratio for lenders nine times to
soak up liquidity and curb credit growth.
"But the deposit rate is still too low to attract savings from
other investment channels, so the impact of a rate hike on the
stock market would be limited in the long term," Wang added. "The
market may digest a rate rise soon after it is announced, but
before the announcement, the market will generally be cautious.
That's why the market is rebounding very slowly."
High valuation concerns have led the stock market to correct
over the past weeks, with the most pessimistic analyst forecasting
the index could hit bottom by year's end of as low as 4,500.
The decline of PetroChina, which ended at 38.82 yuan on Friday,
was one of the main reasons which triggered a broader sell-off on
valuation concerns.
Qin Hong, a strategist at Bohai Investment, said PetroChina, the
world's largest listed firm by market value, could influence the
index's performance today. Every one percentage point move in its
shares could translate into a movement of more than 10 points in
the index.
(Shanghai Daily November 19, 2007)
