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Wednesday 6 May 2009
China Stocks ‘Bubble’ Is Almost Over
A rally in China’s stocks is close to ending as investor confidence in the nation’s economic recovery weakens and bank lending slows, according to China Galaxy Securities Co., the nation’s largest brokerage.
China Stocks ‘Bubble’ Is Almost Over, Galaxy Securities Says
By Chua Kong Ho 5 May 2009
(Bloomberg) – A rally in China’s stocks is close to ending as investor confidence in the nation’s economic recovery weakens and bank lending slows, according to China Galaxy Securities Co., the nation’s largest brokerage.
The benchmark Shanghai Composite Index has surged 50 percent since last year’s low on Nov. 4 amid signs the government’s stimulus measures are reviving growth in the world’s third-largest economy. The gains have driven valuations on the index to 27.2 times, the highest in a year. These levels are “signs of a bubble,” Galaxy Securities strategists led by Teng Tai wrote in a report today.
“China’s economy has bottomed but the recovery may be weaker than forecast,” the analysts wrote. “Bank lending will have to slow down. This will cap the growth in money supply and affect the supply of funds for the stock market.”
China’s manufacturing expanded in April for a second month, according to the Federation of Logistics and Purchasing. China’s new bank loans in April were about 400 billion yuan ($58.6 billion), Caijing magazine reported yesterday. That compares with loans of 1.89 trillion yuan in March, according to central bank data.
“Investors should be defensive and cut equities exposure,” the analysts wrote.
Galaxy Securities joins China Asset Management Co., the nation’s biggest fund company, in saying the country’s stocks are overvalued.
Wang Yawei, who chairs China Asset’s investment committee, pared his equity holdings in the first quarter and said last month the stock market was driven by “speculative trading.”
The Shanghai Composite tumbled 72 percent from its October 2007 peak to its trough last November.
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China Stocks ‘Bubble’ Is Almost Over, Galaxy Securities Says
By Chua Kong Ho
5 May 2009
(Bloomberg) – A rally in China’s stocks is close to ending as investor confidence in the nation’s economic recovery weakens and bank lending slows, according to China Galaxy Securities Co., the nation’s largest brokerage.
The benchmark Shanghai Composite Index has surged 50 percent since last year’s low on Nov. 4 amid signs the government’s stimulus measures are reviving growth in the world’s third-largest economy. The gains have driven valuations on the index to 27.2 times, the highest in a year. These levels are “signs of a bubble,” Galaxy Securities strategists led by Teng Tai wrote in a report today.
“China’s economy has bottomed but the recovery may be weaker than forecast,” the analysts wrote. “Bank lending will have to slow down. This will cap the growth in money supply and affect the supply of funds for the stock market.”
China’s manufacturing expanded in April for a second month, according to the Federation of Logistics and Purchasing. China’s new bank loans in April were about 400 billion yuan ($58.6 billion), Caijing magazine reported yesterday. That compares with loans of 1.89 trillion yuan in March, according to central bank data.
“Investors should be defensive and cut equities exposure,” the analysts wrote.
Galaxy Securities joins China Asset Management Co., the nation’s biggest fund company, in saying the country’s stocks are overvalued.
Wang Yawei, who chairs China Asset’s investment committee, pared his equity holdings in the first quarter and said last month the stock market was driven by “speculative trading.”
The Shanghai Composite tumbled 72 percent from its October 2007 peak to its trough last November.
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