Wednesday, February 13, 2008

Chinese Stock Market Unshaken Despite Global Recession

by Richard York

The Chinese stock market has remained unaffected and on the contrary it appears strong in the face of economic slowdown in the world and it has also withstood the upheavals in the stock market that occurred for the past many weeks. Experts are of the opinion that the acute decline in the prices of A-share has given them a kind of attractiveness that is increasing. The current prices of the A-shares are the true reflection of the worth of the shares. The rapid decline began from 21st of January and the standard Shanghai Composite Index or the SCI declined by 16.6% which in turn wiped out almost 5 trillion Yuan or $700 billion in market capitalization. Finance ministers from the seven main economies of the world held that the falling down housing market of the United States had badly hurt the economy of the world and there is further trouble waiting when the banks already under loads of debts tighten in on their credit policies.

The stocks in the European market suffered a one percent decline in the beginning of February this year but then the recovery was small for the European stock market. It was another blow for the Asian stock market at the beginning of February and the reason was the slowdown in the US economy. The stock market of Shanghai and Shenzhen remained closed because of the holiday for the Chinese Spring Festival. Stock market experts say that though stock markets across Asia including India, Hong Kong, Singapore, South Korea and the Philippines recorded a decline but the Chinese stock market is by far very unlikely to be affected.

The standard price-to-earnings percentage of the 300 Shanghai Composite Index stocks dropped to 25 times which is founded on the current year’s estimated profit earnings. The 300 SCI stocks are representative of 60% of the overall market capitalization. Zhang Fan, Changjiang Securities analyst has stated that the acute falls in the stocks mostly cut the premium that was speculated for the many important stocks and this is the reason why they have become even more attractive for important investors. The comment in this regard by Yan Ji who is the HSBC Jintrust Fund Management Co investment director, is important because he says that investment opportunities are generated by such sharp decline the reason also being that fundamentals of the stock market do not change. He also warned that the price to index ratio is not the reliable indicator that one must use while investing in the market. Investment in the market can take place by taking stock of the overall investment scenario.

The opinion of Yan Ji also finds support from the many brokers in the mainland. Chen Li the chief analyst at the Shenyin Wanguo Securities said that the market would remain unstable until April. By the month of April many of the financial institutions of the United States would be releasing their annual reports. The market is unpredictable till all the financial institutions come up with their annual reports.

 

 

 

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