Market likely to correct this week

By Joyce Pan | May 25, 2009, Monday |

Print Edition

SHANGHAI'S stock market is likely to correct due to several factors, including a quicker float of non-tradable shares and the resumption of initial public offerings, analysts said.

"Several factors have caused concerns over a market correction, including the accelerated floating of non-tradable shares, over-valued shares, the resumption of initial public offerings and decreasing effects of measures on the local market," Guotai Jun'an Securities Co analysts said in a note.

Shanghai's key stock index fell in the second half of last week, sending the gauge to a 1.8 percent drop as shares were believed to be overvalued. The Shanghai Composite Index ended at 2,597.6 points last week.

"Overvalued shares pose an increasingly negative impact on investors, and the market is more likely to keep fluctuating," said Xu Haiyang, an analyst at Rising Securities Co. "Investors also worry that resumption of initial public offerings could divert capital from the market."

China has unveiled a new pricing mechanism that favors minority investors who buy into IPOs, paving the way for the resumption of new stock sales on the mainland after a nine-month hiatus.

The index is seen at between 2,450 and 2,620 this week, said Qian Qimin, an analyst at Shenyin and Wanguo Securities Co.

Finance

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Market likely to correct this week

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