Chinese stock market at a turning point: Analysts
Tuesday, 10 July 2007
SHANGHAI, July 9 (AFP): China's government may have finally won its fight to cool investor enthusiasm for stocks, after months of speculative frenzy set regulators on edge over a potential crash, analysts said Sunday.
Since January investors had ignored repeated government warnings about the run-up in Chinese share prices, but after another volatile week investors' appetite for investing appears to be diminishing, they said.
"The liquidity boom in China is finally seeing signs of a substantial change," said Jerry Lou, an economist at Morgan Stanley in Hong Kong.
Share prices are still up nearly 40 per cent from January after climbing 130 per cent last year, but trade volumes are down sharply.
Daily turnover has declined by more than half from May's highs of more than $40 billion, while the number of new stock accounts being opened slipped to between 70,000 and 80,000 a day.
In May when the key Shanghai composite index hit a series of records to put the index above 4,300 points, new retail trading accounts were being opened at a rate of 300,000 a day.
Although the market closed the week only about 1.5 per cent lower after recouping 4.5 per cent Friday, since mid-June prices have slipped more than 13 per cent, with sentiment dogged by a spate of new policies.
Those anxieties came into focus when the Shanghai index tumbled 5.25 per cent Thursday, after falling more than two per cent Wednesday, on fears over the impact of a special 1.55 trillion yuan (US$204 billion) treasury bond issue.
Wu Zuyao, chief strategist with Galaxy Securities based in Beijing, said that investors were bothered by the uncertainty over how these new policies would play out.
"The uncertainty in these policies has accelerated the market corrections," said Wu.
Investors have been unsettled over government intentions since the special bond plan was approved a week ago and on news that the finance ministry would issue the first tranche of 500 billion yuan soon.
Since January investors had ignored repeated government warnings about the run-up in Chinese share prices, but after another volatile week investors' appetite for investing appears to be diminishing, they said.
"The liquidity boom in China is finally seeing signs of a substantial change," said Jerry Lou, an economist at Morgan Stanley in Hong Kong.
Share prices are still up nearly 40 per cent from January after climbing 130 per cent last year, but trade volumes are down sharply.
Daily turnover has declined by more than half from May's highs of more than $40 billion, while the number of new stock accounts being opened slipped to between 70,000 and 80,000 a day.
In May when the key Shanghai composite index hit a series of records to put the index above 4,300 points, new retail trading accounts were being opened at a rate of 300,000 a day.
Although the market closed the week only about 1.5 per cent lower after recouping 4.5 per cent Friday, since mid-June prices have slipped more than 13 per cent, with sentiment dogged by a spate of new policies.
Those anxieties came into focus when the Shanghai index tumbled 5.25 per cent Thursday, after falling more than two per cent Wednesday, on fears over the impact of a special 1.55 trillion yuan (US$204 billion) treasury bond issue.
Wu Zuyao, chief strategist with Galaxy Securities based in Beijing, said that investors were bothered by the uncertainty over how these new policies would play out.
"The uncertainty in these policies has accelerated the market corrections," said Wu.
Investors have been unsettled over government intentions since the special bond plan was approved a week ago and on news that the finance ministry would issue the first tranche of 500 billion yuan soon.