Stocks News
- Fund managers keep faith in markets
Date: 2-Mar-2007 Sources: (Shenzhen Daily)
CHINESE shares rocked global markets after their biggest one-day loss in a decade Tuesday, but fund managers were unfazed, predicting that steady reforms, a booming economy and too much money chasing too few investments would keep China's share prices on the rise.
Indeed, Chinese stock markets Wednesday clawed back one-third of the prior day's nearly 10 percent fall, which many fund managers said was merely a technical correction that was long overdue.
The Shanghai and Shenzhen markets, with a combined capi- talization of US$1.4 trillion, may see further falls in the short term, especially with valuations still higher than in most markets, but investors' faith in the markets was intact, they said.
'It is more of a reality check. Things have run up far too quickly,'said Bratin Sanyal, Hong Kong-based head of Asian equity investments at ING Investment Management, who manages US$2.3 billion in Asia, including A shares.
'In the medium to long term, is the market going to do well? Yes. Is it going to remain an important market for investors? Yes. Will people remain interested in China? Yes,'he said.
And there is still plenty of money floating around China's markets.
The latest bank reserve ratio hike Sunday, which sucked about 160 billion yuan (US$20.7 billion) out of the banking system, was just enough to offset China's trade surplus of US$16 billion in January, said Yu Rongquan, chief investment officer of Fortune SGAM Fund Management with around 25 billion yuan.
'So from this point of view, plus further improvement in the quality of listed firms with the listing of more blue-chip companies and more asset injections, there should be no problem for the stock market in the medium term,'Yu said.
Valuations of A shares, especially in the financial sector, are still rich, with an average price around 40 times earnings for 2005, according to official data.
But that would come down to 30 times or lower as many A-share companies are expected to post sharply higher earnings for 2006, fund managers said.
A shares, partially available to foreign investors through a quota system, fell nearly 9 percent Tuesday on the Shanghai and Shenzhen exchanges, erasing about US$140 billion of value.
The tumble, which some analysts said was partly driven by fears the authorities would crack down on speculation, came a day after the main Shanghai index jumped to an all-time high, bringing its gains for this year to 14 percent.
The market surged 130 percent last year, making it the world's best-performing major market as it pulled out of a nearly five-year slump.
The Shanghai index Wednesday rebounded 3.9 percent to 2,881.073 points, with small-cap shares leading the rally, while the Shenzhen Composite Subindex rose 3.2 percent.
But in the short term, it would not be surprising if the main index fell 20 to 30 percent from current levels, said Pieter van Putten, managing director of Singapore-based APS Asset Management Pte Ltd., which manages a US$450 million A-share portfolio.
The government is also helping to support the markets, resuming the launch of new stock funds after a two-month freeze imposed due to concern about overly rapid growth.
Domestic fund managers noted that one of four domestic stock funds launched raised 10 billion yuan in just one hour Tuesday, underscoring brisk investor demand, although a sales manager for a fund house said part of that money may have been withdrawn from existing funds as investors took profits.
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