Chinese stock market enters fast lane
Updated: 2007-12-22 12:43
Anticipating the policies to bring in more IPOs, China stock market value management and research center made an optimistic estimation of China's stock market performance in the coming year, saying the total market value will surge to more than 50 trillion yuan.
China's domestic stock market valuation has just approached 30 trillion yuan by December 17, after surpassing the country's entire economy value in September.
Chinese companies headed into the world's top ten company rankings in market value. They are PetroChina, China Mobile, Industrial and Commercial Bank of China, Sinopec and China life.
In terms of market value, Chinese securities market has become the largest one among emerging markets and ranked the fourth in the world, the center said in a report released Tuesday.
The report further estimated that the market will have more than 50 stocks with market value of over one trillion yuan.
The quick pace of IPO on the mainland market would probably continue next year, said Li Feng, a senior equity strategy analyst with China Galaxy Securities.
"Most of the listed companies still have high earning prospects due to good operation performance and forecasted growing profits," said Li.
Experts predicted that tourism, catering and department stores sectors would be the principle force for next year's IPO as the earnings expectations of these industries were on the rise.
Guodu Securities analyst Zhang Xiang believed that securities companies and media sector will have "big actions" next year.
The ongoing IPOs surely brought the expansion of the stock market. It could also prove effective in absorbing excess liquidity in China.
But what may be more significant is that a group of high-quality companies that worth investing were introduced into the market, which scaled down the risk of buying stocks in mainland market caused by disproportionately high earnings per share.
The interaction of investors and listed companies was exemplified by the banking industry. Going public helped replenish the capital of Chinese banks, which were regarded as insolvent by international investors. The capital adequacy ratio (CAR) of the four major state-owned commercial banks was raised to more than 12 percent by the end of September.
If the investors were merely speculating on Chinese commercial banks when they bought into the Industrial and Commercial Bank of China (ICBC) in 2006, they may now come to see more value in this sector. The net profit of all listed banks in China on average surged by more than half in the first half of this year.
"According to released mid-year reports, the assets quality of listed banks has improved, and the income components have been optimized," said Guo Min, analyst of Shanghai-based Securities and Finance Research Institute.
The non-performing loans of Chinese major commercial banks was reduced to 6.6 percent by September. This indicative was 23.6 percent only five years ago.
Listed banks were motivated to improve the financial performance. They strove for getting a better loan-deposit ratio, optimized loan structure, and endeavored to boost its traditionally weak interbank business.
The improved performance started to help banks attract more money on the capital market. The Bank of Communications and the China Construction Bank raised about 30 billion yuan and 58 billion yuan respectively when they were listed in the mainland market, which is much higher than their valuation when they went public in Hong Kong.
The government would surely welcome more win-win situations like this, and it is determined to further realize its ambition to build a complicated multi-tier capital market next year.
Central Huijin general manager Xie Ping joked with ICBC governor Yang Kaisheng in a recent forum, "Now you see Governor Yang more than before, and he smiles more. That's what IPO gives you."
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