Stocks News
- Regulators, investors at odds over markets
Date: 29-May-2007 Sources: (Shenzhen Daily)
EXPERTS in China and abroad warned last week of an imminent contraction in the Asian giant's roaring stock markets but defiant investors remain confident that the market knows best.
'The market will seek its own balance and correct itself,'said Yan Li, an analyst with Chinalion Securities in Beijing.
'The government should do nothing to interfere,'she said, adding that it was increasingly difficult for regulators to influence a market that has tripled in value to about US$1.6 trillion since 2005.
The share markets again posted a series of record gains last week, with the key Shanghai index rising to 4,272.11 yesterday for a rise of 2.21 percent on seven days earlier, its 10th consecutive weekly increase and up 57.3 percent since January.
And highly sensitive B shares are up nearly 80 percent since January.
The once marginalized bourse, with a market capitalization merely 2 percent of the US$2.3 trillion A-share market, is seeing sharper rises now, but it may spearhead any future correction.
'That market can't just go up, but needs to correct,'said Zhang Qi, a Shanghai-based analyst with Haitong Securities.
Last week's broader market advance came despite warnings from former U.S. central bank chief Alan Greenspan and the Organisation of Economic Cooperation and Development (OECD) that current prices are unsustainable.
China's stocks watchdog issued its second public warning within two weeks of alerting investors to market risks and only days after central bank measures to soak up the flood of liquidity failed to make a dent.
While the spate of cautionary remarks triggered a pullback Thursday, investors were back in full-force Friday as trade volumes on the A-share market neared record volumes of about US$42 billion.
Chinalion's Yan said that regulatory efforts to talk down the market are unlikely to be effective as the current momentum is so strong that any sign of interference risks making matters worse.
'When negative news is released, investors may take it as sign they can buy into the market more cheaply. That's why we saw there was no impact on the market when the central bank increased interest rates,'said Yan.
The central bank hiked interest rates and bank reserve requirements as well as widening the currency's trading band two weeks ago, but investors ignored the move.
U.S. ratings agency Standard and Poor's said that China's regulators had no choice but to make gradual efforts to intervene.
'A heavy-handed approach, however, could have a significantly negative impact on the economy,'said Standard and Poor's credit analyst Tan Kim-eng.
Sponsor Results:
