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Thursday, 20 March 2008
SSE Weekly Fibo
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As at 18 April 2008, SSE closed @ 3094.67 -128.07(↓3.97%), lost 49% since topping out, along with other global markets, last October. @_@
China Stocks, Once Frothy, Fall by Half In Six Months
By JAMES T. AREDDY in Shanghai and CRAIG KARMIN in New York 19 April 2008
The sharp decline in Chinese stocks is approaching a milestone: With a 4% drop Friday, the market has fallen by nearly half since its peak last fall. The decline has wiped out nearly $2.5 trillion of wealth and is testing the government's apparent resolve to let the market find equilibrium on its own.
The plunge has slashed the savings of millions of Chinese investors who jumped into the market as it rose six-fold in two years. It is crimping expansion in the country's nascent financial sector and may put a squeeze in corporate coffers. But so far, it has not slowed the world's fastest-growing major economy.
The benchmark Shanghai Composite Index has lost 49% since topping out, along with other global markets, last October. The slide was triggered by the global economic slowdown combined with the lofty valuations of Chinese stocks. It accelerated recently as investors became convinced the government would not intervene to stop the fall. The index finished Friday at 3094.67, down 4%.
While Chinese shares have been among the hardest-hit anywhere, some other emerging markets have also had a tough time, falling 6% so far this year after rising an average of 32% a year over the past five years. The other big loser is India, which was the other big winner over the past few years. The Mumbai Sensex Index is down 19% so far this year.
Arjun Divecha, an emerging-markets specialist who manages about $20 billion for GMO LLC, says that until recently, investors bought pricey stocks in both markets because these economies were seen as the fastest-growing. "But with U.S. and global growth expectations slowing, it's the markets that were bid up the most that are getting hurt the most now," he said.
First-quarter losses by China's mutual funds soared, with 346 funds managed by 58 companies losing 647.5 billion yuan (92.5 billion U.S. dollars), eight times the amount of the previous quarter, according to TX Investment Consulting.
TX based its calculations on the funds' quarterly reports.
Combined assets under management shrank to 2.48 trillion yuan from 3.26 trillion yuan at the end of last year.
Stock-oriented funds lost 466.59 billion yuan in the first quarter, up 860 percent compared with the fourth quarter.
Most funds reduced holdings in financial, steel, transport and warehousing stocks. Some slightly increased their holdings in the petrochemical, real estate, food and beverage sectors.
As of mid-April, the benchmark Shanghai Composite Index was 49.5 percent below its record high in October.
Shares were mixed on Monday, despite regulatory measures to stabilize the market, as investor confidence remained weak. The Shanghai index edged up 0.72 percent, while the Shenzhen Component Index lost 1.75 percent.
As at Wednesday, 23 April 2008, SSE closed @ 3,278.33 +130.54 (+4.15%). ^_^
Banks lead Shanghai stock rally
By Fu Chenghao Thursday, 24 April, 2008
SHANGHAI stocks rose more than 4 percent yesterday after the key index dipped below 3,000 points on Tuesday.
Lenders led the charge after China Merchants Bank Co reported higher earnings.
The Shanghai Composite Index, which covers yuan-denominated A shares and hard-currency B shares, advanced 4.15 percent to 3,278.33. Turnover was 86.1 billion yuan (US$12.3 billion), against Tuesday's 58.8 billion yuan.
On Tuesday, the index fell below the key 3,000 level for the first time in 13 months, before recovering to positive territory by the close.
"Many started to add holdings after the index fell below 3,000," said Chen Huiqin at Huatai Securities. "And we think 3,000 should be the short-term bottom."
China's securities regulator on Sunday announced restrictions on the sale of newly freed and previously non-tradable stocks held by big shareholders.
The market-boosting move came after the Shanghai index suffered its steepest decline in more than 11 years last week. Last Friday's close saw the index nearly 50 percent off its peak in October last year.
"Have you ever seen such a plunge elsewhere in the world? Even without the support policy, the index should bounce back now," Chen said.
China Merchants Bank climbed 4.21 percent to 32.42 yuan after posting a 157 percent jump in first-quarter earnings, leading gains in other financial companies.
Oil producers were also in favor on speculation the government is considering a more friendly tax formula, to support earnings. Chinese oil companies, which sell fuel products under state-capped prices, are booking losses in their refining business with crude rates at record highs.
Top Asian refiner China Petroleum & Chemical Corp, or Sinopec, jumped 6.46 percent to 10.88 yuan. PetroChina Co, the biggest weighting in the index, rose 3.19 percent to 16.52 yuan. PetroChina's gain follows its plan to double annual natural gas output at its Xinjiang field from 5 billion cubic meters to 10 billion cubic meters from 2010 to 2015.
Property developers, which had slumped over the past week on credit and price concerns, bounced back. Poly Real Estate Group Co surged 7.98 percent to 20.30 yuan and Gemdale Corp advanced 7.85 percent to 13.33 yuan.
Jiangxi Copper rallied 10 percent to 27.41 yuan after saying first-quarter profit rose 46 percent to 1.26 billion yuan.
As at Thursday, 24 April 2008, SSE closed @ 3,583.028 +304.70 (↑9.29%). ^_^
China stock market soars 9 percent on trading tax cut
By Samuel Shen Thu Apr 24, 2008
SHANGHAI (Reuters) - China's main stock index soared over 9 percent in frenzied trade on Thursday after the government cut the share trading tax, seeking to end a bear market that had slashed stock prices by half in six months.
Across the country, individual investors piled back into the market, and Internet chat rooms carried messages praising government officials believed to be responsible for the tax cut.
"The government has sent a very clear signal to help the market regain its confidence," said Xu Yan, strategist at Shenyin & Wanguo Securities.
But while fund managers and analysts said the tax cut could push stocks up a further 10 percent or so in coming days or weeks, many noted that high inflation and the threat of an economic slowdown this year had not disappeared.
"If the market leapfrogs like this, the rally will be exhausted in two or three days," said Du Changyong, head of investment at Industrial Fund Management.
"The policy change helps market sentiment, but it doesn't change economic fundamentals. So though the market is generally considered to have found a floor for now, it's not unlikely for it to go lower in the long term if the economy worsens."
Some warned that the tax cut risked encouraging the same speculative excesses which led to the market's crash. Investment bank Morgan Stanley described it as "a compromise with market speculators".
"We do not think such a rally can last. We advise investors to sell into strength," Morgan Stanley said in a report, adding that with the market expecting corporate earnings growth of 34 percent this year, there was plenty of room for it to be disappointed if such growth did not materialize.
The Shanghai Composite Index .SSEC closed 9.29 percent higher at 3,583.028 points, posting its second biggest rise this decade, after jumping as much as 9.60 percent in early trade.
Almost 500 Shanghai shares rose their 10 percent daily limits, as gaining stocks outnumbered losers by 892 to two.
Turnover in Shanghai A shares more than doubled to 188.5 billion yuan ($27.0 billion), the largest amount since last October, reaching levels seen during the height of China's stock market bull run last year.
GOVERNMENT SIGNAL
The reduction in the stamp tax, to 0.1 percent from 0.3 percent, will make little difference to the investment costs of all but the most active traders.
But partly because of China's history as a command economy, investors are sensitive to official signals. They see the tax cut as a sign that authorities want to put a floor under the market at 3,000 points, to prevent a further slide from damaging the economy or possibly even causing social unrest.
The index soared more than sixfold between June 2005 and last October's record peak, but then plunged 51 percent to Tuesday's 13-month low of 2,990.788 points, hit by rising inflation, the threat of an economic slowdown, and heavy supplies of new equity.
Even before the tax cut was announced late on Wednesday, the index began rebounding from near technical support at 2,956 points, the 61.8 percent retracement of its rise from mid-2005.
A 38.2 percent retracement of the index's tumble from mid-January -- a reasonable expectation at the end of a downtrend -- would reach the 4,000-point area, technical analysis shows.
Fund managers said that given the uncertainty over the Chinese and global economy, all sectors of the market would not continue rising sharply across the board.
Some said Thursday's huge turnover might actually be a negative sign, showing plenty of investors were willing to sell when stocks rose their 10 percent limits. If the market had been truly bullish about the longer term, investors might have held on to stocks, limiting turnover, they said.
"Today's market is full of pent-up exuberance. But eventually it's fundamentals, not government policies, that decide share prices," said Chen Ge, manager at Fullgoal Fund Management.
"So before we see signs of an improving economy, I don't think the rally will become another bull run. Further sharp rises will be capped by the growing willingness of institutional shareholders to take profits."
CITIC Securities said in a report that the strongest sectors in coming weeks were likely to be brokerages, because a revived stock market would boost their commissions, and blue chips in the banking, real estate and machinery sectors.
Life insurers may also outperform because of their large investments in the stock market.
Shares in exporters may lag the market because of their exposure to the sagging U.S. economy and to appreciation of the yuan against the dollar, some fund managers said.
HONG KONG -- Dusk is the best time of day in Hong Kong, as the gray, polluted skies and thick humidity that rule the office hours of this workaholic city give way to a skyline wave of neon lights, pulsing to life seemingly with the flip of a switch.
Like everything else in China these days, the change is sudden, and filled with expectation. But when it comes to the country's nascent stock market, investors need to be wary about being blinded by the lights of excitement and possibility.
Chinese stocks soared more than 9% on Thursday after the government reversed a ruling last year that tripled the taxes, or stamp duties, on stock trades. Just as the ruling last year caused the market in Shanghai to plunge, the reversal triggered the biggest single-day rally of the year to date.
After a steady slide in the past several months that has seen the Shanghai Composite Index give back half its value -- including a 12% decline last week in one of the worst weeks in years -- the government is pulling out all the stops to try to provoke a rally this summer ahead of the Olympic Games.
Earlier in the week, the Chinese government limited block trades in a way that it hoped would reduce the volatility that has wiped more than $2 trillion in market cap off the market since last year. On another day, it imposed a limit on casino growth in the booming gambling city of Macau, causing a surge in shares of the casinos that are already there, including the big Las Vegas boys.
This type of blatant manipulation, done without shame and expected by the big institutions that ride the wave in Asia, can only end badly for investors. Like everything else ahead of the Olympics, it's a PR stunt designed for the short term. But it will only leave investors more hooked on stock-trading profits and increase the demand for more manipulation.
Indeed, a late-day rally in Shanghai shares on Wednesday lent credence to the speculation that many of the big institutions had been tipped to the government's stamp-duty announcement, which came after the market closed and was widely expected for several weeks. So with one hand the government is increasing the heroin drip to small investors by making it cheaper to trade penny stocks at the retail level, while with the other it's satisfying the need for inside information at the big institutions.
At some point, even the government won't be able to control the universal sentiment that the game is rigged, and the credibility of the "Buy China" story will start to wear. That doesn't bode well for the Hong Kong market, which has become steadily more linked to Shanghai over the past several years but still enjoys a reputation as one of Asia's big independent markets for global investors.
One thing that the plunge in the global financial sector in the past year has proved -- underscored by the panic that accompanied the collapse of Bear Stearns last month -- is that investors can smell fear. After a brief rally, the Shanghai Composite Index will test its lows below 3,000 again, and all eyes will turn to the government to see what else it has in its arsenal. Like Ben Bernanke's promise to do whatever it takes to maintain confidence in the Fed's ability to keep the global financial system afloat, investors will want it proven to them over and over again.
China may be able to buy time until after the Olympics in August. And indeed, after the more than 50% drop, it's possible that the ultimate lows aren't much lower. But as any investor who bought tech stocks when the Nasdaq Composite Index peaked above 5,000 in early 2000, or who bought Japan's Nikkei 225 Index when it topped 30,000 in 1989 can tell you, these things don't just right themselves overnight, no matter who's at the switch.
MONTREAL - The most significant story on the Asian equity markets this week was the Chinese government’s decision to lower the stamp tax on stock transactions from 0.3% to 0.1% from April 24. The move was designed to shift the psychological mood of a market that had declined over 50% in six months, and it succeeded, as the Shanghai Composite Index responded with a 9.3% jump on Thursday.
Indeed it is less widely remarked that in just over 48 hours - from late Tuesday to the close on Thursday - the index moved up no less than 20% from 3,000 to 3,600. As mentioned here last week, the 2,900-3,000 technical level is a crucial one, for the next support after it is almost fully half as low again, in the 1,600-1,700 range.
The authorities clearly felt an "attitude adjustment" was necessary, and they have succeeded at least in the short run. The action on Friday by mid-afternoon in China consisted of nondescript gyrations in the Shanghai index between 3,500 and 3,600.
For the record, there is a significant technical resistance awaiting the index at the 4,250 level if it gets that far; but a healthy market needs slow and steady advances punctuated by periodic consolidations, rather than gaps-up that provide no protection on the way back down.
Cross-listings with the Hong Kong market more and more link it to Shanghai, and the Hang Seng Index followed Shanghai's pattern for the week but with much reduced amplitude swings, moving up 6.2% from last Friday’s close to this Friday’s open, although inching down steadily through the day so far.
However, the Hong Kong’s overall technical pattern is rather unlike Shanghai’s. Currently at about 25,250, the Hang Seng is in the middle of a gap-down from January 16-17 and has to decide which way to turn: there is support at 25,000 and resistance at 25,800.
The Japanese market is also at a crossroads. The stronger dollar this week helped exporters to lift the Nikkei 225 to a two-month high above 13,800 by Friday midday. However, it cannot stay long at the 13,500-14,000 level, because the chart shows that this is either a continuing resistance from the downside if the index falls below, or a support to the upside if it succeeds in penetrating.
The technical significance of this level for the Japanese market dates from late 1998 and was reinforced in early 2006. Yet even if the Nikkei makes it through, it is not out of the woods. Recall that this stock index spent most of the 1990s in a trading range between roughly 15,000 and 20,000.
Other markets each followed their own patterns, finishing up 2% at most with the exception of Taiwan, which was down about that much. Among these, it is important to remark that India’s BSE Sensex 30 continues on the upswing after finally pushing back through the 15,800-16,000 range and has begun Friday with a move toward 17,000.
The chart suggests that Mumbai has consolidated its irrational overexuberance from last autumn and winter and is ready for a significant move higher if the international financial environment is propitious. It seems likely, however, that further, longer-term consolidation will be necessary before the index is prepared to move through its all-time high near 21,000, established in the first half of January.
The Nifty, however, had a nondescript week. It has held up above its important 4,600 support this month, but it needs to confirm its breakout from a descending trendline tracing its early January and March peaks: as the Sensex in fact did during the week just ended. Then we will know that the Indian markets have at least broken upwards into a trading range and that the danger of further declines is diminished at least for the time being.
As mentioned above, with the exception of Taiwan, the other major Asian equity markets are closing between unchanged and up 2% on the week. Indeed, with the exception of Shanghai and Hong Kong, overall volatility was sharply lower, and there was hardly an exchange that moved outside a 2-3% range all week.
The only major Asian equity index that bears further significant comment this week is Australia’s, where the All Ordinaries ended the week on Thursday by closing just above the 5,650 level. (Australia and New Zealand were closed Friday for Anzac memorial day.) The Australian index looks poised to advance if it can confirm its break upwards through a fan of three downtrends traceable from its mid-December high through the February, March, and April peaks.
The other Australian benchmark, however, the S&P/ASX 200, which in its construction is closer to the BSE Sensex 30 (while the Australian All Ordinaries, like India’s Nifty, is more broadly based), shares not the BSE Sensex but the Nifty pattern, in that it still has to confirm breakout from a downtrend traceable from its December high.
So with the exception of Chinese markets, the week just ended was much calmer than what we have become used to. With the US Federal Reserve meeting early next week, the rest of the month is likely to be more lively than this week’s calm, which may herald a coming storm.
As at Monday, 28 April 2008, SSE closed @ 3,474.72 -83.03 (↓2.33%)...
China's shares fall on weak Sinopec profits, fears of higher crude prices
April 28, 2008
SHANGHAI, China - Chinese shares fell Monday after the country's biggest oil refiner reported weak first-quarter earnings amid concern about rising crude prices.
The benchmark Shanghai Composite Index fell 2.3 percent to 3,474.72. The Shenzhen Composite Index for China's smaller second market fell 1.3 percent to 1,045.03.
"It looks like investors needed to take a breather from last week's rally. Just look at today's low trade volume," said TX Investment analyst Qiu Yanying.
Turnover in Shanghai on Monday totaled 111.74 billion yuan (US$15.9 billion; �10.2 billion), down 42 percent from Friday.
The Shanghai index surged 15 percent last week after Beijing tried to boost slumping markets by cutting taxes on stock trading and saying it would curb sales of previously nontradable shares.
Last Thursday, the Shanghai index surged 9.3 percent in its largest single-day gain in percentage terms since Oct. 23, 2001.
"The key focus of Monday's session was oil refiners, following the release of Sinopec's weak first-quarter earnings. The fact that oil prices hit a record high made a bad picture worse," Qiu said.
Shares of Sinopec, or China Petroleum & Chemical Corp., fell 4.4 percent after it said first-quarter profits fell 69 percent from the same time last year.
Chinese oil companies have suffered heavy losses on refining due to government controls that bar them from passing on record crude prices to consumers. Companies have been subsidizing their refining losses with profits from their drilling units.
New York crude oil futures hit a record high of US$119.93 a barrel on Monday after the weekend shut-in of a pipeline system that carries 700,000 barrels of North Sea crude a day to the U.K.
PetroChina, the publicly traded arm of China's biggest oil company, China National Petroleum Corp., fell 4.3 percent. The company accounts for 20 percent of the Shanghai index and each 5 percent decline in its price cuts 100 points off the index, according to analysts.
Despite Monday's losses, analysts were generally optimistic about the market's outlook.
"I'm not bothered by today's decline. It's just a temporary reaction to Sinopec's weak first-quarter earnings, which investors had been expecting anyway," said Southwest Securities analyst Yan Li.
"Beijing has already made it clear it's behind the stock markets," she said. "The only thing people are debating now is how much further the Shanghai index will rise, whether it's to 4000 or 4500."
China's currency, the yuan, rose to 7.0044 to the U.S. dollar on the over-the-counter market, up from Friday's 7.0100.
(BEIJING) Investor Jim Rogers is buying Chinese shares, among the world's worst performers this year, as the market has bottomed, and he's focusing on agriculture, tourism, airlines and education.
'All my new money goes to commodities and China,' said Mr Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999. He spoke at a seminar in Beijing on Saturday.
'All the panic looks like a bottom,' he said. 'I have bought in the last four to five weeks. I've been buying shares in China for the first time in a long time.'
China's benchmark CSI 300 Index plunged as much as 39 per cent this year, becoming at one point the world's second-worst performer, amid speculation government steps to quell inflation would hurt corporate profits. The index is a measure of shares traded in Shanghai and Shenzhen.
The stock market, the world's fourth biggest, surged almost six-fold in the two years through 2007, driven by optimism growth in the economy would boost earnings. The slump triggered government moves to support the market, with the latest taking effect on April 24, when the tax on stock trading was reduced. Chinese stocks jumped 9.3 per cent that day, the most since Oct 23, 2001, helping lift the index to a 16 per cent gain last week.
Some analysts remain unconvinced the measures will have an effect with Morgan Stanley and Credit Suisse Group last week saying China's shares are a 'sell'.
'Given earnings deceleration, we do not think such a rally can last,' Morgan Stanley's Jerry Lou and Allen Gui wrote in a report on April 25. 'The government's cut of the stamp duty seems to suggest that it is running out of silver bullets.' Chinese companies' Hong Kong-listed 'H shares' are more attractive than yuan-denominated 'A shares', Credit Suisse's Vincent Chan wrote in a separate note.
Selling Chinese shares in 2008 'is a big mistake', said Mr Rogers, adding that he had also bought stocks in Singapore, Taiwan and Hong Kong. 'I have never sold any Chinese shares.' Mr Rogers said he bought shares related to tourism and education, which 'in China will continue to be a major industry'. Other investments include those of airlines, water companies and agricultural producers, he revealed.
Mr Rogers was bullish on the Chinese yuan, saying it could eventually rise to two yuan per US dollar. 'Don't sell your renminbi, because it will go a lot higher in the next 20 years,' he predicted. -- Bloomberg
As at Wednesday, 30 April 2008, SSE closed @ 3,693.11 +169.70 (↑4.82%). ^_^
* SSE will be closed for Labour Day Holiday on 1st & 2nd May 2008.
April 30, 2008
SHANGHAI, China - The benchmark Shanghai Composite Index closed up 4.82 percent at 3,693.11, after the financial sector heavyweights posted strong first-quarter earnings.
A significant rebound in Sinopec and PetroChina also helped to boost the market.
The Shanghai A-share Index rose 4.8 percent to 3,875.22, while the Shenzhen A-share Index was up 4.0 pct at 1,152.55.
The Shanghai B-share Index closed up 2.4 percent at 261.32 while the Shenzhen B-share Index rose 2.3 percent to 572.14.
China earnings outlook regains some luster after Q1
By Lu Jianxin - Analysis Wed Apr 30, 2008
SHANGHAI (Reuters) - Earnings prospects for China's 1,500-plus listed companies have brightened after they posted better-than-forecast profits in the first quarter, bolstered by unexpectedly brisk economic growth.
Six fund managers and securities analysts surveyed by Reuters on Wednesday predicted median profit growth for listed Chinese firms of 25 percent in 2008, up from a forecast of 20 percent about a month ago.
A pick-up in the stock market and a likely slowing in yuan appreciation were among other supportive factors they cited for the earnings outlook.
The forecast suggests China Inc will maintain the first-quarter pace of year-on-year earnings growth, calculated at more than 23 percent by the official Shanghai Securities News, for the rest of the year.
While impressive on a global scale -- U.S. first quarter earnings, for example, are down by about a fifth -- the growth is still less than half the gains made during 2007.
A major boost came from China's economy growing at an annual rate of 10.6 percent in the first quarter, achieved despite the worst snow storms of the decade in many areas of the country and slower export growth as the U.S. credit crisis hit the global economy.
"We raise our forecast for 2008 corporate earnings (to 25 percent) from 15-20 percent a month ago, partly due to a stronger-than-expected economy in the first quarter," said senior stock analyst Cao Xuefeng at West China Securities in Chengdu.
But first-quarter earnings growth slowed sharply after growing by about half in 2007, according to the Shanghai Securities News.
That in turn was below analysts' forecasts late last year of a 50 to 60 percent rise for 2007. Earnings rose by about two-thirds in the first three quarters of 2007 alone.
SHARES SLIDE
First quarter earnings were hit particularly hard by the plunge of more than a third in the benchmark Shanghai Composite Index's .SSEC. That eroded the investment income of index heavyweights such as top insurer China Life Insurance, which posted a 61 percent drop in first-quarter profit.
The bottom line of export-oriented companies was also hurt by faster appreciation of the yuan, which gained 4.2 percent in value against the dollar in the first quarter -- its quickest quarterly appreciation since 1993.
"The first-quarter earnings indicated a strong polarization of listed companies' performance, with banks outperforming the overall market while refineries were hit by surging oil prices," said Yan Zhenghua, chief strategist at China Asset Management.
"The trend is likely to continue for all of 2008," he added.
Among 15 listed Chinese banks, most reported a more than doubling of first-quarter profit, partly due to an income tax cut for Chinese companies to 25 percent from 33 percent this year.
The reduction will boost overall corporate earnings by an estimated 10 percent this year and will benefit banks the most, partly because of their huge turnover.
Banks, which account for about 30 percent of all listed firms' earnings, are under pressure from official economic cooling steps such as a new loan quota system, but analysts now believe their total profits will grow at least 40 to 50 percent for in 2008, an upgrade from a forecast about a month ago for a 30 percent rise.
Oil giant PetroChina, however, posted a disappointing 32 percent fall in net profit for the first quarter and Sinopec Corp, Asia's largest oil refiner, suffered a 69 percent dive, as soaring crude oil prices pushed their refining business into a deep loss.
The two account for about 20 percent of domestically listed firms' total earnings.
RESILIENT ECONOMY
But a resilient economy is likely to keep earnings buoyant.
For 2008, analysts forecast economic growth around 10 percent. An easing in consumer price inflation, which reached an 11 year high of 8.7 percent in February before falling back to 8.3 percent in March, would also help companies facing higher input costs.
China has also slowed the appreciation of the yuan, which is nearly unchanged against the dollar in April, as the government, which guides the market through the central bank's daily mid-points, appears to be responding to exporters' complaints.
That could combine with a possible stabilizing in the U.S. economy to boost business for small exporters such as toy maker Haixin Group, which posted a loss of 5.88 million yuan ($840,000) in the first quarter.
Earnings will also get a boost from a steadier stock market. The main index has rebounded 23 percent from a 13 month low last week after the government stepped in with supportive measures, including a cut in the stock trading duty.
Stock investments accounted for about 15 percent of listed firms' net profit in 2007.
The average price-to-earnings (PE) ratio of China's listed firms has dropped to about 27 times 2007 profit, from a peak of 46 times late last year. Many analysts said that was unsustainably high but profit growth around 25 percent this year should bring PE ratios down further, to about 22 times.
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As at 18 April 2008, SSE closed @ 3094.67 -128.07(↓3.97%), lost 49% since topping out, along with other global markets, last October. @_@
China Stocks, Once Frothy, Fall by Half In Six Months
By JAMES T. AREDDY in Shanghai and CRAIG KARMIN in New York
19 April 2008
The sharp decline in Chinese stocks is approaching a milestone: With a 4% drop Friday, the market has fallen by nearly half since its peak last fall. The decline has wiped out nearly $2.5 trillion of wealth and is testing the government's apparent resolve to let the market find equilibrium on its own.
The plunge has slashed the savings of millions of Chinese investors who jumped into the market as it rose six-fold in two years. It is crimping expansion in the country's nascent financial sector and may put a squeeze in corporate coffers. But so far, it has not slowed the world's fastest-growing major economy.
The benchmark Shanghai Composite Index has lost 49% since topping out, along with other global markets, last October. The slide was triggered by the global economic slowdown combined with the lofty valuations of Chinese stocks. It accelerated recently as investors became convinced the government would not intervene to stop the fall. The index finished Friday at 3094.67, down 4%.
While Chinese shares have been among the hardest-hit anywhere, some other emerging markets have also had a tough time, falling 6% so far this year after rising an average of 32% a year over the past five years. The other big loser is India, which was the other big winner over the past few years. The Mumbai Sensex Index is down 19% so far this year.
Arjun Divecha, an emerging-markets specialist who manages about $20 billion for GMO LLC, says that until recently, investors bought pricey stocks in both markets because these economies were seen as the fastest-growing. "But with U.S. and global growth expectations slowing, it's the markets that were bid up the most that are getting hurt the most now," he said.
Posted Saturday, April 19, 2008
China's mutual funds lose $93 bln in Q1
April 22, 2008
First-quarter losses by China's mutual funds soared, with 346 funds managed by 58 companies losing 647.5 billion yuan (92.5 billion U.S. dollars), eight times the amount of the previous quarter, according to TX Investment Consulting.
TX based its calculations on the funds' quarterly reports.
Combined assets under management shrank to 2.48 trillion yuan from 3.26 trillion yuan at the end of last year.
Stock-oriented funds lost 466.59 billion yuan in the first quarter, up 860 percent compared with the fourth quarter.
Most funds reduced holdings in financial, steel, transport and warehousing stocks. Some slightly increased their holdings in the petrochemical, real estate, food and beverage sectors.
As of mid-April, the benchmark Shanghai Composite Index was 49.5 percent below its record high in October.
Shares were mixed on Monday, despite regulatory measures to stabilize the market, as investor confidence remained weak. The Shanghai index edged up 0.72 percent, while the Shenzhen Component Index lost 1.75 percent.
Source: Xinhua
Posted Thursday, April 24, 2008
As at Wednesday, 23 April 2008, SSE closed @ 3,278.33 +130.54 (+4.15%). ^_^
Banks lead Shanghai stock rally
By Fu Chenghao
Thursday, 24 April, 2008
SHANGHAI stocks rose more than 4 percent yesterday after the key index dipped below 3,000 points on Tuesday.
Lenders led the charge after China Merchants Bank Co reported higher earnings.
The Shanghai Composite Index, which covers yuan-denominated A shares and hard-currency B shares, advanced 4.15 percent to 3,278.33. Turnover was 86.1 billion yuan (US$12.3 billion), against Tuesday's 58.8 billion yuan.
On Tuesday, the index fell below the key 3,000 level for the first time in 13 months, before recovering to positive territory by the close.
"Many started to add holdings after the index fell below 3,000," said Chen Huiqin at Huatai Securities. "And we think 3,000 should be the short-term bottom."
China's securities regulator on Sunday announced restrictions on the sale of newly freed and previously non-tradable stocks held by big shareholders.
The market-boosting move came after the Shanghai index suffered its steepest decline in more than 11 years last week. Last Friday's close saw the index nearly 50 percent off its peak in October last year.
"Have you ever seen such a plunge elsewhere in the world? Even without the support policy, the index should bounce back now," Chen said.
China Merchants Bank climbed 4.21 percent to 32.42 yuan after posting a 157 percent jump in first-quarter earnings, leading gains in other financial companies.
Oil producers were also in favor on speculation the government is considering a more friendly tax formula, to support earnings. Chinese oil companies, which sell fuel products under state-capped prices, are booking losses in their refining business with crude rates at record highs.
Top Asian refiner China Petroleum & Chemical Corp, or Sinopec, jumped 6.46 percent to 10.88 yuan. PetroChina Co, the biggest weighting in the index, rose 3.19 percent to 16.52 yuan. PetroChina's gain follows its plan to double annual natural gas output at its Xinjiang field from 5 billion cubic meters to 10 billion cubic meters from 2010 to 2015.
Property developers, which had slumped over the past week on credit and price concerns, bounced back. Poly Real Estate Group Co surged 7.98 percent to 20.30 yuan and Gemdale Corp advanced 7.85 percent to 13.33 yuan.
Jiangxi Copper rallied 10 percent to 27.41 yuan after saying first-quarter profit rose 46 percent to 1.26 billion yuan.
Posted Thursday, April 24, 2008
As at Thursday, 24 April 2008, SSE closed @ 3,583.028 +304.70 (↑9.29%). ^_^
China stock market soars 9 percent on trading tax cut
By Samuel Shen
Thu Apr 24, 2008
SHANGHAI (Reuters) - China's main stock index soared over 9 percent in frenzied trade on Thursday after the government cut the share trading tax, seeking to end a bear market that had slashed stock prices by half in six months.
Across the country, individual investors piled back into the market, and Internet chat rooms carried messages praising government officials believed to be responsible for the tax cut.
"The government has sent a very clear signal to help the market regain its confidence," said Xu Yan, strategist at Shenyin & Wanguo Securities.
But while fund managers and analysts said the tax cut could push stocks up a further 10 percent or so in coming days or weeks, many noted that high inflation and the threat of an economic slowdown this year had not disappeared.
"If the market leapfrogs like this, the rally will be exhausted in two or three days," said Du Changyong, head of investment at Industrial Fund Management.
"The policy change helps market sentiment, but it doesn't change economic fundamentals. So though the market is generally considered to have found a floor for now, it's not unlikely for it to go lower in the long term if the economy worsens."
Some warned that the tax cut risked encouraging the same speculative excesses which led to the market's crash. Investment bank Morgan Stanley described it as "a compromise with market speculators".
"We do not think such a rally can last. We advise investors to sell into strength," Morgan Stanley said in a report, adding that with the market expecting corporate earnings growth of 34 percent this year, there was plenty of room for it to be disappointed if such growth did not materialize.
The Shanghai Composite Index .SSEC closed 9.29 percent higher at 3,583.028 points, posting its second biggest rise this decade, after jumping as much as 9.60 percent in early trade.
Almost 500 Shanghai shares rose their 10 percent daily limits, as gaining stocks outnumbered losers by 892 to two.
Turnover in Shanghai A shares more than doubled to 188.5 billion yuan ($27.0 billion), the largest amount since last October, reaching levels seen during the height of China's stock market bull run last year.
GOVERNMENT SIGNAL
The reduction in the stamp tax, to 0.1 percent from 0.3 percent, will make little difference to the investment costs of all but the most active traders.
But partly because of China's history as a command economy, investors are sensitive to official signals. They see the tax cut as a sign that authorities want to put a floor under the market at 3,000 points, to prevent a further slide from damaging the economy or possibly even causing social unrest.
The index soared more than sixfold between June 2005 and last October's record peak, but then plunged 51 percent to Tuesday's 13-month low of 2,990.788 points, hit by rising inflation, the threat of an economic slowdown, and heavy supplies of new equity.
Even before the tax cut was announced late on Wednesday, the index began rebounding from near technical support at 2,956 points, the 61.8 percent retracement of its rise from mid-2005.
A 38.2 percent retracement of the index's tumble from mid-January -- a reasonable expectation at the end of a downtrend -- would reach the 4,000-point area, technical analysis shows.
Fund managers said that given the uncertainty over the Chinese and global economy, all sectors of the market would not continue rising sharply across the board.
Some said Thursday's huge turnover might actually be a negative sign, showing plenty of investors were willing to sell when stocks rose their 10 percent limits. If the market had been truly bullish about the longer term, investors might have held on to stocks, limiting turnover, they said.
"Today's market is full of pent-up exuberance. But eventually it's fundamentals, not government policies, that decide share prices," said Chen Ge, manager at Fullgoal Fund Management.
"So before we see signs of an improving economy, I don't think the rally will become another bull run. Further sharp rises will be capped by the growing willingness of institutional shareholders to take profits."
CITIC Securities said in a report that the strongest sectors in coming weeks were likely to be brokerages, because a revived stock market would boost their commissions, and blue chips in the banking, real estate and machinery sectors.
Life insurers may also outperform because of their large investments in the stock market.
Shares in exporters may lag the market because of their exposure to the sagging U.S. economy and to appreciation of the yuan against the dollar, some fund managers said.
($1 = 6.98 yuan)
Posted Thursday, April 24, 2008
China flips switch and stock market bolts
By David Callaway
April 24, 2008
HONG KONG -- Dusk is the best time of day in Hong Kong, as the gray, polluted skies and thick humidity that rule the office hours of this workaholic city give way to a skyline wave of neon lights, pulsing to life seemingly with the flip of a switch.
Like everything else in China these days, the change is sudden, and filled with expectation. But when it comes to the country's nascent stock market, investors need to be wary about being blinded by the lights of excitement and possibility.
Chinese stocks soared more than 9% on Thursday after the government reversed a ruling last year that tripled the taxes, or stamp duties, on stock trades. Just as the ruling last year caused the market in Shanghai to plunge, the reversal triggered the biggest single-day rally of the year to date.
After a steady slide in the past several months that has seen the Shanghai Composite Index give back half its value -- including a 12% decline last week in one of the worst weeks in years -- the government is pulling out all the stops to try to provoke a rally this summer ahead of the Olympic Games.
Earlier in the week, the Chinese government limited block trades in a way that it hoped would reduce the volatility that has wiped more than $2 trillion in market cap off the market since last year. On another day, it imposed a limit on casino growth in the booming gambling city of Macau, causing a surge in shares of the casinos that are already there, including the big Las Vegas boys.
This type of blatant manipulation, done without shame and expected by the big institutions that ride the wave in Asia, can only end badly for investors. Like everything else ahead of the Olympics, it's a PR stunt designed for the short term. But it will only leave investors more hooked on stock-trading profits and increase the demand for more manipulation.
Indeed, a late-day rally in Shanghai shares on Wednesday lent credence to the speculation that many of the big institutions had been tipped to the government's stamp-duty announcement, which came after the market closed and was widely expected for several weeks. So with one hand the government is increasing the heroin drip to small investors by making it cheaper to trade penny stocks at the retail level, while with the other it's satisfying the need for inside information at the big institutions.
At some point, even the government won't be able to control the universal sentiment that the game is rigged, and the credibility of the "Buy China" story will start to wear. That doesn't bode well for the Hong Kong market, which has become steadily more linked to Shanghai over the past several years but still enjoys a reputation as one of Asia's big independent markets for global investors.
One thing that the plunge in the global financial sector in the past year has proved -- underscored by the panic that accompanied the collapse of Bear Stearns last month -- is that investors can smell fear. After a brief rally, the Shanghai Composite Index will test its lows below 3,000 again, and all eyes will turn to the government to see what else it has in its arsenal. Like Ben Bernanke's promise to do whatever it takes to maintain confidence in the Fed's ability to keep the global financial system afloat, investors will want it proven to them over and over again.
China may be able to buy time until after the Olympics in August. And indeed, after the more than 50% drop, it's possible that the ultimate lows aren't much lower. But as any investor who bought tech stocks when the Nasdaq Composite Index peaked above 5,000 in early 2000, or who bought Japan's Nikkei 225 Index when it topped 30,000 in 1989 can tell you, these things don't just right themselves overnight, no matter who's at the switch.
Posted Thursday, April 24, 2008
The calm before the storm?
By R M Cutler
April 26, 2008
MONTREAL - The most significant story on the Asian equity markets this week was the Chinese government’s decision to lower the stamp tax on stock transactions from 0.3% to 0.1% from April 24. The move was designed to shift the psychological mood of a market that had declined over 50% in six months, and it succeeded, as the Shanghai Composite Index responded with a 9.3% jump on Thursday.
Indeed it is less widely remarked that in just over 48 hours - from late Tuesday to the close on Thursday - the index moved up no less than 20% from 3,000 to 3,600. As mentioned here last week, the 2,900-3,000 technical level is a crucial one, for the next support after it is almost fully half as low again, in the 1,600-1,700 range.
The authorities clearly felt an "attitude adjustment" was necessary, and they have succeeded at least in the short run. The action on Friday by mid-afternoon in China consisted of nondescript gyrations in the Shanghai index between 3,500 and 3,600.
For the record, there is a significant technical resistance awaiting the index at the 4,250 level if it gets that far; but a healthy market needs slow and steady advances punctuated by periodic consolidations, rather than gaps-up that provide no protection on the way back down.
Cross-listings with the Hong Kong market more and more link it to Shanghai, and the Hang Seng Index followed Shanghai's pattern for the week but with much reduced amplitude swings, moving up 6.2% from last Friday’s close to this Friday’s open, although inching down steadily through the day so far.
However, the Hong Kong’s overall technical pattern is rather unlike Shanghai’s. Currently at about 25,250, the Hang Seng is in the middle of a gap-down from January 16-17 and has to decide which way to turn: there is support at 25,000 and resistance at 25,800.
The Japanese market is also at a crossroads. The stronger dollar this week helped exporters to lift the Nikkei 225 to a two-month high above 13,800 by Friday midday. However, it cannot stay long at the 13,500-14,000 level, because the chart shows that this is either a continuing resistance from the downside if the index falls below, or a support to the upside if it succeeds in penetrating.
The technical significance of this level for the Japanese market dates from late 1998 and was reinforced in early 2006. Yet even if the Nikkei makes it through, it is not out of the woods. Recall that this stock index spent most of the 1990s in a trading range between roughly 15,000 and 20,000.
Other markets each followed their own patterns, finishing up 2% at most with the exception of Taiwan, which was down about that much. Among these, it is important to remark that India’s BSE Sensex 30 continues on the upswing after finally pushing back through the 15,800-16,000 range and has begun Friday with a move toward 17,000.
The chart suggests that Mumbai has consolidated its irrational overexuberance from last autumn and winter and is ready for a significant move higher if the international financial environment is propitious. It seems likely, however, that further, longer-term consolidation will be necessary before the index is prepared to move through its all-time high near 21,000, established in the first half of January.
The Nifty, however, had a nondescript week. It has held up above its important 4,600 support this month, but it needs to confirm its breakout from a descending trendline tracing its early January and March peaks: as the Sensex in fact did during the week just ended. Then we will know that the Indian markets have at least broken upwards into a trading range and that the danger of further declines is diminished at least for the time being.
As mentioned above, with the exception of Taiwan, the other major Asian equity markets are closing between unchanged and up 2% on the week. Indeed, with the exception of Shanghai and Hong Kong, overall volatility was sharply lower, and there was hardly an exchange that moved outside a 2-3% range all week.
The only major Asian equity index that bears further significant comment this week is Australia’s, where the All Ordinaries ended the week on Thursday by closing just above the 5,650 level. (Australia and New Zealand were closed Friday for Anzac memorial day.) The Australian index looks poised to advance if it can confirm its break upwards through a fan of three downtrends traceable from its mid-December high through the February, March, and April peaks.
The other Australian benchmark, however, the S&P/ASX 200, which in its construction is closer to the BSE Sensex 30 (while the Australian All Ordinaries, like India’s Nifty, is more broadly based), shares not the BSE Sensex but the Nifty pattern, in that it still has to confirm breakout from a downtrend traceable from its December high.
So with the exception of Chinese markets, the week just ended was much calmer than what we have become used to. With the US Federal Reserve meeting early next week, the rest of the month is likely to be more lively than this week’s calm, which may herald a coming storm.
Posted Monday, April 28, 2008
As at Monday, 28 April 2008, SSE closed @ 3,474.72 -83.03 (↓2.33%)...
China's shares fall on weak Sinopec profits, fears of higher crude prices
April 28, 2008
SHANGHAI, China - Chinese shares fell Monday after the country's biggest oil refiner reported weak first-quarter earnings amid concern about rising crude prices.
The benchmark Shanghai Composite Index fell 2.3 percent to 3,474.72. The Shenzhen Composite Index for China's smaller second market fell 1.3 percent to 1,045.03.
"It looks like investors needed to take a breather from last week's rally. Just look at today's low trade volume," said TX Investment analyst Qiu Yanying.
Turnover in Shanghai on Monday totaled 111.74 billion yuan (US$15.9 billion; �10.2 billion), down 42 percent from Friday.
The Shanghai index surged 15 percent last week after Beijing tried to boost slumping markets by cutting taxes on stock trading and saying it would curb sales of previously nontradable shares.
Last Thursday, the Shanghai index surged 9.3 percent in its largest single-day gain in percentage terms since Oct. 23, 2001.
"The key focus of Monday's session was oil refiners, following the release of Sinopec's weak first-quarter earnings. The fact that oil prices hit a record high made a bad picture worse," Qiu said.
Shares of Sinopec, or China Petroleum & Chemical Corp., fell 4.4 percent after it said first-quarter profits fell 69 percent from the same time last year.
Chinese oil companies have suffered heavy losses on refining due to government controls that bar them from passing on record crude prices to consumers. Companies have been subsidizing their refining losses with profits from their drilling units.
New York crude oil futures hit a record high of US$119.93 a barrel on Monday after the weekend shut-in of a pipeline system that carries 700,000 barrels of North Sea crude a day to the U.K.
PetroChina, the publicly traded arm of China's biggest oil company, China National Petroleum Corp., fell 4.3 percent. The company accounts for 20 percent of the Shanghai index and each 5 percent decline in its price cuts 100 points off the index, according to analysts.
Despite Monday's losses, analysts were generally optimistic about the market's outlook.
"I'm not bothered by today's decline. It's just a temporary reaction to Sinopec's weak first-quarter earnings, which investors had been expecting anyway," said Southwest Securities analyst Yan Li.
"Beijing has already made it clear it's behind the stock markets," she said. "The only thing people are debating now is how much further the Shanghai index will rise, whether it's to 4000 or 4500."
China's currency, the yuan, rose to 7.0044 to the U.S. dollar on the over-the-counter market, up from Friday's 7.0100.
Posted Monday, April 28, 2008
Jim Rogers buys Chinese shares as market bottoms
April 28, 2008
(BEIJING) Investor Jim Rogers is buying Chinese shares, among the world's worst performers this year, as the market has bottomed, and he's focusing on agriculture, tourism, airlines and education.
'All my new money goes to commodities and China,' said Mr Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999. He spoke at a seminar in Beijing on Saturday.
'All the panic looks like a bottom,' he said. 'I have bought in the last four to five weeks. I've been buying shares in China for the first time in a long time.'
China's benchmark CSI 300 Index plunged as much as 39 per cent this year, becoming at one point the world's second-worst performer, amid speculation government steps to quell inflation would hurt corporate profits. The index is a measure of shares traded in Shanghai and Shenzhen.
The stock market, the world's fourth biggest, surged almost six-fold in the two years through 2007, driven by optimism growth in the economy would boost earnings. The slump triggered government moves to support the market, with the latest taking effect on April 24, when the tax on stock trading was reduced. Chinese stocks jumped 9.3 per cent that day, the most since Oct 23, 2001, helping lift the index to a 16 per cent gain last week.
Some analysts remain unconvinced the measures will have an effect with Morgan Stanley and Credit Suisse Group last week saying China's shares are a 'sell'.
'Given earnings deceleration, we do not think such a rally can last,' Morgan Stanley's Jerry Lou and Allen Gui wrote in a report on April 25. 'The government's cut of the stamp duty seems to suggest that it is running out of silver bullets.' Chinese companies' Hong Kong-listed 'H shares' are more attractive than yuan-denominated 'A shares', Credit Suisse's Vincent Chan wrote in a separate note.
Selling Chinese shares in 2008 'is a big mistake', said Mr Rogers, adding that he had also bought stocks in Singapore, Taiwan and Hong Kong. 'I have never sold any Chinese shares.' Mr Rogers said he bought shares related to tourism and education, which 'in China will continue to be a major industry'. Other investments include those of airlines, water companies and agricultural producers, he revealed.
Mr Rogers was bullish on the Chinese yuan, saying it could eventually rise to two yuan per US dollar. 'Don't sell your renminbi, because it will go a lot higher in the next 20 years,' he predicted. -- Bloomberg
Posted Monday, April 28, 2008
As at Wednesday, 30 April 2008, SSE closed @ 3,693.11 +169.70 (↑4.82%). ^_^
* SSE will be closed for Labour Day Holiday on 1st & 2nd May 2008.
April 30, 2008
SHANGHAI, China - The benchmark Shanghai Composite Index closed up 4.82 percent at 3,693.11, after the financial sector heavyweights posted strong first-quarter earnings.
A significant rebound in Sinopec and PetroChina also helped to boost the market.
The Shanghai A-share Index rose 4.8 percent to 3,875.22, while the Shenzhen A-share Index was up 4.0 pct at 1,152.55.
The Shanghai B-share Index closed up 2.4 percent at 261.32 while the Shenzhen B-share Index rose 2.3 percent to 572.14.
Posted Wednesday, April 30, 2008
China earnings outlook regains some luster after Q1
By Lu Jianxin - Analysis
Wed Apr 30, 2008
SHANGHAI (Reuters) - Earnings prospects for China's 1,500-plus listed companies have brightened after they posted better-than-forecast profits in the first quarter, bolstered by unexpectedly brisk economic growth.
Six fund managers and securities analysts surveyed by Reuters on Wednesday predicted median profit growth for listed Chinese firms of 25 percent in 2008, up from a forecast of 20 percent about a month ago.
A pick-up in the stock market and a likely slowing in yuan appreciation were among other supportive factors they cited for the earnings outlook.
The forecast suggests China Inc will maintain the first-quarter pace of year-on-year earnings growth, calculated at more than 23 percent by the official Shanghai Securities News, for the rest of the year.
While impressive on a global scale -- U.S. first quarter earnings, for example, are down by about a fifth -- the growth is still less than half the gains made during 2007.
A major boost came from China's economy growing at an annual rate of 10.6 percent in the first quarter, achieved despite the worst snow storms of the decade in many areas of the country and slower export growth as the U.S. credit crisis hit the global economy.
"We raise our forecast for 2008 corporate earnings (to 25 percent) from 15-20 percent a month ago, partly due to a stronger-than-expected economy in the first quarter," said senior stock analyst Cao Xuefeng at West China Securities in Chengdu.
But first-quarter earnings growth slowed sharply after growing by about half in 2007, according to the Shanghai Securities News.
That in turn was below analysts' forecasts late last year of a 50 to 60 percent rise for 2007. Earnings rose by about two-thirds in the first three quarters of 2007 alone.
SHARES SLIDE
First quarter earnings were hit particularly hard by the plunge of more than a third in the benchmark Shanghai Composite Index's .SSEC. That eroded the investment income of index heavyweights such as top insurer China Life Insurance, which posted a 61 percent drop in first-quarter profit.
The bottom line of export-oriented companies was also hurt by faster appreciation of the yuan, which gained 4.2 percent in value against the dollar in the first quarter -- its quickest quarterly appreciation since 1993.
"The first-quarter earnings indicated a strong polarization of listed companies' performance, with banks outperforming the overall market while refineries were hit by surging oil prices," said Yan Zhenghua, chief strategist at China Asset Management.
"The trend is likely to continue for all of 2008," he added.
Among 15 listed Chinese banks, most reported a more than doubling of first-quarter profit, partly due to an income tax cut for Chinese companies to 25 percent from 33 percent this year.
The reduction will boost overall corporate earnings by an estimated 10 percent this year and will benefit banks the most, partly because of their huge turnover.
Banks, which account for about 30 percent of all listed firms' earnings, are under pressure from official economic cooling steps such as a new loan quota system, but analysts now believe their total profits will grow at least 40 to 50 percent for in 2008, an upgrade from a forecast about a month ago for a 30 percent rise.
Oil giant PetroChina, however, posted a disappointing 32 percent fall in net profit for the first quarter and Sinopec Corp, Asia's largest oil refiner, suffered a 69 percent dive, as soaring crude oil prices pushed their refining business into a deep loss.
The two account for about 20 percent of domestically listed firms' total earnings.
RESILIENT ECONOMY
But a resilient economy is likely to keep earnings buoyant.
For 2008, analysts forecast economic growth around 10 percent. An easing in consumer price inflation, which reached an 11 year high of 8.7 percent in February before falling back to 8.3 percent in March, would also help companies facing higher input costs.
China has also slowed the appreciation of the yuan, which is nearly unchanged against the dollar in April, as the government, which guides the market through the central bank's daily mid-points, appears to be responding to exporters' complaints.
That could combine with a possible stabilizing in the U.S. economy to boost business for small exporters such as toy maker Haixin Group, which posted a loss of 5.88 million yuan ($840,000) in the first quarter.
Earnings will also get a boost from a steadier stock market. The main index has rebounded 23 percent from a 13 month low last week after the government stepped in with supportive measures, including a cut in the stock trading duty.
Stock investments accounted for about 15 percent of listed firms' net profit in 2007.
The average price-to-earnings (PE) ratio of China's listed firms has dropped to about 27 times 2007 profit, from a peak of 46 times late last year. Many analysts said that was unsustainably high but profit growth around 25 percent this year should bring PE ratios down further, to about 22 times.
Posted Wednesday, April 30, 2008
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