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Economy, IPO issue to weigh on index

SHANGHAI'S key stock index is seen to fluctuate this week on uncertainties brought by the possible resumption of initial public offerings and concerns over the macroeconomic situation.

The Shanghai Composite Index gained a total of 6.27 percent in May and closed at 2,632.93 points last Wednesday.

"The market is not yet ready for the resumption of IPOs as the financial crisis is not completely over," said Zhang Xiuqi, an analyst at Guotai Jun'an Securities.

He said the resumption of IPOs might cause investors to panic, spurring fears that capital in the market will be stretched and will ultimately weigh down on the key index.

A new pricing mechanism that favors minority investors who purchase into IPOs was unveiled last month, paving the way for the resumption of new stock sales on the Chinese mainland after a nine-month hiatus, analysts said.

Founder Securities also agreed in a research note that generally the index is not likely to stag a spectacular climb over the next several weeks.

"The banking sector and other blue chips are likely to perform better given their earnings ability, and oil producers may also benefit with surging of crude prices," wrote Cao Jianneng, an analyst at Founder Securities. "Turnover will also remain low. Although the market is expecting a recovery, some of the economic statistics are still not favorable."


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