Top Biz News
Analysts expect sunny days ahead for bourses
By Li Xiang (China Daily)
Updated: 2010-01-19 07:53
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With economists predicting robust growth in China this year, the nation's capital market is also expected to maintain its upward march bolstered by strong earnings numbers from listed firms, said a leading securities firm.
China's A-share market is likely to grow nearly 2.8 times over the world average of 20 to 30 percent, indicating that the benchmark Shanghai index could peak at around 5940 points this year, said Xiangcai Securities.
The market rebound will get help from moderate inflation and the better-than-expected performance of listed companies, said Li Kang, chief economist with Xiangcai Securities.
Li expects China's GDP growth to be around 10.3 percent and the yuan to appreciate by 7 percent. That in turn would increase foreign capital flows and boost market liquidity, he said.
However, some analysts feel that these predictions are far too optimistic as the government is likely to tighten monetary policy to avoid the potential risks from an asset bubble this year.
"The key factor is when the government will exit the stimulus plan. So far, the monetary policy is still relatively loose but it's definitely going to be tighter in 2010," said Li Jianfeng, an analyst with Shanghai Securities.
"In our view, listed companies are unlikely to see better-than-expected net profit growth this year. We see growth rates of around 26 percent, slightly higher than last year," he said.
Institutional investors too are cautiously optimistic about the A-share market this year and expect the index to hover between 4300 to 4700 points. While they expect the uptrend to continue, they also expect high volatility in the market.
Gong Fangxiong, chief economist of JP Morgan in China, said in December that the A-share market may peak at 3600 points and any upward momentum would depend largely on the government's policies to curb speculation in the real estate market.
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"The sooner the US recovers from the crisis, the quicker the bullish market may end in China," said Morgan Stanley China strategist Jerry Lou.
Li Daxiao, head of the research institute with Yingda Securities, said the important thing for investors to do at the current level of 3,000 points is to stay in the market as the fundamentals appear to be good and the long-term trend bullish.
"It's important for investors to stay in the market and they shouldn't sell the scrips they hold hastily," he said.
The benchmark Shanghai Composite Index yesterday ended up 0.4 percent at 3237 points while the Shenzhen Composite Index rose 0.73 percent to 13361 points.
