Poor performance will slow stock market
By Fei Ya (China Daily)
Updated: 2006-07-21 08:53
Listed companies' poor performance and the government's tightening monetary
policy will slow China's soaring stock market in the second half of this
year.
A poll of five stock analysts shows that the market is not likely
to enjoy the broad buoyancy it did in the first six months of 2006.
A
CITIC Securities' recent research reveals a much closer connection between the
excessive money supply and the boost to the stock market this
year.
"Excessive money has flown into the market in various ways, and the
ample capital supply has pushed the stock market up over the past months. It was
especially obvious after March." Cheng Weiqing, an analyst with the securities
firm, said.
Based on the trends, the analyst believes the market will
experience a temporary retreat in short-term capital inflows in the second half
of this year, as the government is to take further steps to curb excessive money
supply.
The central bank has already taken measures to tighten the
excessive money liquidity, with April's interest rate increase and July's
reserve ratio hike.
But statistics show that money supply still grew in
June, a sign the central bank may soon take further steps to mop up the
excessive liquidity in the market, said analysts, as the high growth of forex
reserves is unlikely to fall.
And as part of their latest round of policy
tightening, the authorities are paying increased attention to capital flow to
the property and capital markets.
Cheng believes the central bank and the
China Banking Regulatory Commission will take tough measures to control loans
growth, and stem capital flow into the property and capital
markets.
Whereas excessive money supply is not exclusive to China, the
growing concern over excessive liquidity internationally is likely to push a
worldwide cycle of central bank rate hikes, which will in turn affect the flow
of global liquidity to emerging markets, including China's stock market.
(For more biz stories, please visit Industry Updates)
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