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August 24, 2009

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Continued adjustment seen for index

SHANGHAI'S key composite index may continue to fluctuate this week after losing a collective 2.83 percent in a roller coaster-like market last week, analysts said.

The market underwent a rapid period of gains and losses last week, according to a Shenyin and Wanguo Securities note.

"The market will remain rather stable (this week), and the gradual recovery of the Chinese economy will support the index in the long run," it said.

The benchmark Shanghai Composite Index tumbled the most in nine months last Monday before posting the biggest single-day rise in five-and-a-half months on Thursday to finish above 2,900 points. The barometer is still 63 percent above its level at the beginning of this year.

The likelihood of more initial public offerings in the future will also probably divert capital from existing shares in the market.

China CNR Corp Ltd, a locomotive manufacturer, has received the green light from the China Securities Regulatory Commission to launch its IPO of no more than 3 billion shares to raise 6.4 billion yuan (US$936 million) in Shanghai. Guangdong Haid Group also won approval for its IPO of 56 million A shares.

"We still need to keep a close eye on the government's macro-economic policy and major economic statistics will impact the market," Shanghai Securities wrote in a research report.

Guotai Jun'an Securities forecast the index to stay above 2,700 points this week but some adjustment will continue for one or two months.


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