| |
| |
Investors should be patient
|
|
|
|
|
|
| |
2008-03-28 09:28:00 |
| |
|
| |
As the stock market is in the doldrums, many stock commentators are calling for government intervention to help lift investors' sentiment.
They argue that because the government took firm actions to cool the stock market when it was booming, it should take equally firm actions to re-energize it now that it is in a slump.
This of course, is a false argument.
Previous government measures, including a significant hike in stamp duty, were introduced to rein in what was widely seen as excessive speculation that was pushing up the value of many stocks to levels that were considered unsustainable. At one time late last year, the average market multiple shot to more than 80 times, compared to about 20 times or less in other markets, including Hong Kong.
Even more telling was the highly abnormal price gaps between the Hong Kong-listed H shares and mainland-listed A shares of the same mainland enterprises. In some extreme cases, the prices of the H-shares were 30 percent to 50 percent lower than the A-shares of the same enterprises. To understand the absurdity of this phenomenon, we have to bear in mind that the two classes of shares, though listed in different markets, carry the same rights.
During the stock market hay days, the repeated call for caution by senior officials and authoritative economists had largely fallen on deaf ears, while investors, both institutional and private, continued to pour billions of yuan of new capital in the stock market with gusto. At that time, most investors had their enthusiasm pumped up by an overly optimistic assessment of corporate growth potential.
A combination of factors that emerged in the past several months have cast a dark shadow in the minds of many investors. The fall out from the US subprime mortgage troubles may not seem to have too much of a direct impact on the Chinese economy. But the specter of a US-led global economic recession, accompanied by the depreciation of the US dollar and inflating commodity prices, has brought many investors to the view that the outlook of the Chinese corporate sector may not seem as bright as they once thought.
In reassessing their investment strategies, many institutional investors are recasting their attention on market fundamentals, leading to a hasty unloading of at least part of their share holdings. Their activities have been reflected in the sharp decline in the prices of many blue-chip stocks that were at one time the favorites of institutional investors.
The absence of large-scale leverage trading in the market has saved the readjustment process, which saw the leading indicator dropping by almost 30 percent in the past several months, from turning into a rout. To be sure, many investors have lost money, at least, on paper, in the stock market downturn. But an outright crash of the magnitude that could threaten to destroy investors' confidence is most unlikely because there will not be any margin call to perpetuate a snowball effect in the slide.
In fact, the market has been adjusting quite rationally to the latest changes in economic fundamentals. If the scale of adjustment seems too large for some investors, it is because of past excesses rather than present anomalies.
The prospect of the Chinese stock market, like those in other economies, is clouded by economic uncertainties which are not going to dissipate anytime soon. It is, therefore, advisable for investors to keep their cool and allow the market adjustment process to take its course.(China Daily)
|
| |
|
|
|
|
Chinese (ÖÐÎÄ°æ)
