Cautious optimism in stocks
Updated: 2008-01-14 11:58
China's stock market will continue its upward trend this year but at slower pace than recent years, according to an informal phone survey of roughly 30 investment analysts, fund managers and economists.
Nearly all respondents say their confidence in China's stock market remains positive. Even though the benchmark Shanghai Composite Index fell over 18 percent in November, around 70 percent of respondents said they would increase their stock holdings in the next six months.
All of them were asked to comment on the apparent market bubble, major factors affecting the mainland stock market, changes in their stock holdings in the past month and expectations for the next six months.
"The current correction in the A-share market is healthy. The market will rebound somewhat in 2008, but we do not expect the same level of gains experienced in the past two years," says Jing Ulrich, chairman of JPMorgan Securities China Equities.
"A more cautious attitude will linger, and be reinforced by tightening measures as well as verbal warnings from the government against speculative activities," Ulrich says.
"I decreased stock holdings by 10 percent in November from the month before. The stock market correction is expected to continue in the next two or three months while the expected lower annual corporate earnings prompted investors to rethink the current high valuations," says Pan Jiang, chief investment officer of Franklin Templeton Sealand Fund Management Co Ltd.
"I hope the correction will help lower the valuation of many stocks to a reasonable level, which will show the glittering blue-chips," says Yuan Honglong, chief investment officer at Everbright Pramerica Fund Management Co Ltd. Yuan added that he increased stock holdings by 1 to 2 percent in November.
As expected by many analysts, the stock market recovered slightly in December, with the main indicator rising 8 percent in the month. The market continued strong momentum this year, jumping 3.3 percent in the first week of January.
Most analysts expect company valuations to be much lower next year, according to the survey.
"In 2008, China's stock market will continue to be characterized by two striking features: Strong earnings growth among listed companies and robust IPO (initial public offering) fundraising. These trends, combined with a more cautious trading atmosphere, will lead to lower valuations," Ulrich says.
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