With fund managers doing window dressing to boost their portfolio before year's end, Shanghai stocks are expected to rise in the last trading week of 2007, analysts said.
They also said that with no new stock sales this week, more capital may flow into the market, which appeared to have digested Thursday's interest-rate increase.
Shanghai Securities expects the index to move between 5,000 and 5,300 points this week while Orient Securities says it could hover between 5,100 and 5,300 and Huatai Securities sees the barometer between 5,100 and 5,380.
"Mutual funds and portfolio managers have started doing some window dressing, focusing on companies with good earnings outlook and cash flow and whose share prices haven't risen that much in the past year," said Yang Ming, a Shanghai Securities analyst.
Yang said these companies include some in transport infrastructure, machinery manufacturing, power utility and pharmaceutical sectors.
Qian Qimin, a strategist at Shenyin Wanguo Securities, said that as institutional investors have to settle their accounts during the week, "we expect the market will experience correction and consolidate in the first half of the week, before strengthening in the second half."
But Liu Jingde at Cinda Securities, however, was somewhat pessimistic, saying weakness in some blue chips will make it hard for the index to rise.
"The interest rise, the sixth this year, heralds more tightening measures next year," Liu said. "Although the index rose on Friday despite the rate hike, it doesn't mean it could keep rising. A range of negative factors will accumulate."
Liu forecasts Shanghai's key index could fall to as low as 4,950 this week.
The benchmark Shanghai Composite Index rose 1.87 percent to close last week at 5,101.78 points. It fell on Monday and Tuesday but climbed for the rest of last week. The central bank's rate rise announced after the market closed on Thursday did not lead to a black Friday.
(Shanghai Daily December 24, 2007)
