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November 2, 2009

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Outlook may offset pressure

SHANGHAI stocks are set to face pressure from the new Nasdaq-style ChiNext exchange that was launched last week but an optimistic economic outlook may offset any negative impact from it, analysts said.

The Shanghai Composite Index posted a monthly rise of 7.8 percent to end at 2,995.85 last month, boosted by encouraging third-quarter macroeconomic data and stronger corporate profits in the period.

"ChiNext may head south next week due to its hefty valuations," said Chen Huiqin, an analyst at Huatai Securities Co. This may lead to the Shanghai market to decline, he added.

Analysts are also concerned the price earnings ratio was unreasonably high for the first batch of start-up companies that debuted on ChiNext last Friday. Film maker Huayi Brothers Media Corp's PE ratio jumped to as much as 131 times.

Chen said the steady pickup in the Chinese economy and the expected better earnings to be posted by corporations in the fourth quarter are likely to balance any drop in the index.




 

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