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Market set to rise on abundant capital
By Joyce Pan |
July 20, 2009, Monday
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Print Edition
Print Edition
THE Chinese mainland's stock market is likely to remain on the uptrend, thanks to abundant liquidity due to the government's easy monetary policy, analysts said.
However, analysts warned of wide fluctuations as the initial public offering of China State Construction Engineering Corp on Wednesday is expected to suck up 1.6 trillion yuan (US$234 million), substantially diluting the market capital as investors moved funds toward the IPO.
The key Shanghai Composite Index gained a collective 2.4 percent last week to end at 3,189.74 points amid an upbeat sentiment on encouraging signs of economic recovery.
"We are optimistic over the future trend of the local market" so long as the current easy monetary policy is sustained, S&E Securities Brokerage Co wrote in a research note. "Though corrections are inevitable, there is not a huge room for a drop as heavyweights have been stable recently while a strong performance by surrounding markets also supported the local bourse."
China State Construction would issue 12 billion shares to raise more than 40 billion yuan, the biggest sale since the resumption of IPOs after a nine-month hiatus.
"The IPO is sure to dilute market liquidity and cause the market to fluctuate," said Datong Securities Brokerage Co. But the broker is not too worried about the fluctuation as "market sentiment has recovered and there is abundant capital."
Huaxi Securities Co forecast the index to move between 3,300 and 3,330 points this week.
However, analysts warned of wide fluctuations as the initial public offering of China State Construction Engineering Corp on Wednesday is expected to suck up 1.6 trillion yuan (US$234 million), substantially diluting the market capital as investors moved funds toward the IPO.
The key Shanghai Composite Index gained a collective 2.4 percent last week to end at 3,189.74 points amid an upbeat sentiment on encouraging signs of economic recovery.
"We are optimistic over the future trend of the local market" so long as the current easy monetary policy is sustained, S&E Securities Brokerage Co wrote in a research note. "Though corrections are inevitable, there is not a huge room for a drop as heavyweights have been stable recently while a strong performance by surrounding markets also supported the local bourse."
China State Construction would issue 12 billion shares to raise more than 40 billion yuan, the biggest sale since the resumption of IPOs after a nine-month hiatus.
"The IPO is sure to dilute market liquidity and cause the market to fluctuate," said Datong Securities Brokerage Co. But the broker is not too worried about the fluctuation as "market sentiment has recovered and there is abundant capital."
Huaxi Securities Co forecast the index to move between 3,300 and 3,330 points this week.
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