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December 3, 2009

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Bullish 2010 stock run predicted

THE Chinese mainland's two stock markets in Shanghai and Shenzhen are expected to extend bull runs next year, amid fluctuations, driven by the country's fast-growing economy, according to analyst reports.

The economy, low inflation and accelerated industrial profits would drive the benchmark Shanghai Composite Index to as high as 4,200 points, Shenyin Wanguo said in a report yesterday.

The securities house estimated that China's economy would grow 9.6 percent next year and the consumer price index 2.2 percent.

It said the economy would drive up exports by 15.9 percent and industrial profits by 35.5 percent.

"The growing economy will push up the index in the first quarter of next year, but the index will head south in the second quarter before rebounding in the second half," the report said.

Huatai United Securities Co concurred.

"The market will encounter heavy liquidity pressure in the second quarter," Huatai said in a report.

Industrial Securities Co expects that the index will move between 3,200 and 4,300 points next year as robust demands in China's western and rural areas continue to boost the economy.

"Gross domestic product is expected to grow 11 percent next year, which will spur the A-share market to head upward amid fluctuations," Industrial Securities said.

The policy environment would be favorable in the first quarter, but the central government may tighten policies in the second quarter to prevent overheating, it said.

"The government won't increase interest rates or tighten credit until the middle of 2010 on concerns caused by a gloomy global economy," the report said.

New credit has pumped up China's economic growth against the global slowdown but also triggered fears of asset price bubbles as some of this money has snuck into the stocks and real estate.

Industrial Securities estimated that companies listed on the mainland would report a 47 percent increase in revenue in the first half of next year and a 27 percent lift for the whole year.

Guolian Securities Co expects the markets will move in a V-shape next year between 3,100 and 4,400 points.

"The end of looser lending policies and the listing of heavyweight stocks will make the market retreat under liquidity pressure," Guolian Securities said in a report.


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