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��Home>>China Observer

Stock tumble won't affect bullish performance in the long run, expert

www.chinanews.cn 2007-06-06 09:14:06

Chinanews, Beijing, June 6 �C Faced with the big market tumble, a
reporter from the China Securities Journal recently interviewed a group
of financial experts. All of them believe that the recent stock tumble is
only temporary and it won't affect the stock market��s bullish
performance in the long run. The financial experts suggest investors not
to sell their shares at this time.
Hua Sheng, the principal of the Yanjing Overseas Students University said
that Chinese stock market was generally good and the recent tumble was
caused by the overheated performance in the stock market. In the long
run, he said, such tumble won't affect the bullish performance of Chinese
stock market fundamentally. The big tumble was in part caused by some new
investors who, seeing the drop in the market, sold out their shares and
therefore made the market drop even deeper. After a period of time, it is
expected that the stock market will regain momentum to climb in future,
he said.
Wu Xiaoqiu, director of the Renmin University of China's Finance and
Securities Research Institute said that on the whole, Chinese stock
market was generally good. However, there are some structural problems
for the time being, according to him.
The number of Chinese stock account holders now has topped 100 million.
In regard to this problem, he said, there is no need to make a fuss about
it. As Chinese economy develops, it is quite natural for people to make
some changes in their finance assets. In future, securities assets will
tend to make up a larger share in Chinese people��s total assets
structure, which, in the end, will indicate that Chinese public have
accepted new financial ideas. At present, 80% of the American people's
financial assets are shares. In Japan, such ratio has also reached
40-50%. In China, however, related ratio is only 15%, Wu said.
Li Zhenning, board director at Shanghai Rising Fund Management, said that
right now, some international investment companies had failed to make an
objective judgement of Chinese stock market. On the one hand, he said,
they think that Chinese stock market contains big bubbles, while on the
other, they constantly ask China to raise the QFII investing quota. Their
assertions and behaviors seem to be conflicting. Whatever their motives,
one thing is clear: the rising stock prices will surely raise their
buying costs, he said.
Through acquisition and merging activities and overall listing, the
quality of many listed companies has been greatly improved. At present,
many banks and resource companies, that are considered as industrial
leaders in their respective sector, have all gone public. Last year, the
profits made by Chinese listed companies increased by 40%. During the
first quarter of this year, their profits further rose by 70%. Since the
profit-making capability of Chinese listed companies has been improving,
it might not be appropriate to judge the stock market��s investing value
simply by its existing P/E Ratio and market price-net assets ratio. In
fact, the resource value of domestic listed companies is far above their
current market capitalization value. The current market level is not as
high as some people claim, Li noted.

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