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BIZCHINA / Center
Risky?trade?beyond 5,300 points
By Mao Lijun (China Daily)
Updated: 2007-09-17 09:45
The survey showed that more than 60 percent of individual investors
preferred long-term, stable returns and are tolerant of losses up to 20
percent.
Risks and gains
However, the stock market's sharp gains are raising concerns about stock
overvaluations.
Stocks in domestic markets are trading at more than 40 times listed
companies' earnings per share on average, much more than developed
markets overseas, such as 15 times in the United States and 20 times in
Japan.
As stock prices and indexes surge, the A-share market bubble is
accumulating quickly, increasing the risk of bigger fluctuations, experts
say.
"China's equity market is starting to show signs of getting out of
control," says Zuo Xiaolei, chief economist of China Galaxy Securities
Chinese regulators are expected to come up with certain policies to put
the brakes on the surging stock market. They may impose administrative
measures to curb investment demand, although no imminent monetary
tightening measures are expected.
"The country's stock market is still in a policy-sensitive mood," Zhu
Haitao, an analyst with Essence Securities Co, says.
The stock market is likely to be clouded by uncertainties in the short
term, stemming from investors' concerns about further governmental action
and possible monetary tightening measures, he says.
And they believed that a set of policy-related factors in recent days
have already put pressure on stocks and is leading their prices to hike
in the short term.
Such factors include the expected outflow of liquidity to overseas
markets through QDII and direct investment, the issuance of corporate
bonds and treasury bonds, the expectations of another interest rate hike,
the banking regulator's action against irregularities in bank loans
invested in the stock market and expansion pressure from red chips
returning to the home market.
"Liquidity in the domestic stock market is expected to decrease in the
second half because of the expected corporate bonds, return of the giant
red-chip companies and outflow of liquidity to overseas markets," Galaxy
Securities' Qin Xiaobing says.
The inflation figures for August released last Tuesday pushed the stock
market down last week, as the highest figures in 11 years have raised the
specter of a further rise in interest rates and other monetary tightening
measures.
The National Bureau of Statistics said last Tuesday that the Consumer
Price Index (CPI), a barometer of inflation, rose 6.5 percent
year-on-year in August.
And an announcement last week of the sale of 200 billion yuan (US$26.6
billion) ?in special treasury bonds to the public has also pushed stock
the market down.
Economists say they saw a distinctive outflow of investment funds from
the stock market last week.
(For more biz stories, please visit Industry Updates)
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