Expat Village is edited and published by
Iain Williams in Caracas, Venezuela.
An International Herald
Tribune story by
David Barboza at http://www.iht.com
SHANGHAI: Despite a huge sell-off here a few weeks ago that helped trigger a drop in global financial markets, China's stock market continues to race into the record books.
On Wednesday, the Shanghai composite index rose 25.19 points to close at 3,057.38, an all-time high. The Shenzhen component index reached a near-record 8,400.30.
With China's economy booming and stock prices soaring, those left out of the boom now appear to be climbing into the market, buoying share values.
Investors here have repeatedly ignored warnings from government officials and financial experts that share prices may be rising too fast or that a bubble may be emerging.
And many investors say the huge sell- off Feb. 27, when the Shanghai composite plunged 8.8 percent, was simply a temporary setback in a galloping bull market.
But instead of retreating from the volatile market, investors in China have eagerly opened new stock accounts, rushed to sign up to purchase mutual funds and aggressively bid up the shares of Chinese companies.
"The market is promising in the long run," said Cao Zitao, an analyst at Guotai Junan Securities in Shanghai. "Since the economy is doing well, there's no doubt the stock market will continue to grow over the next year or two."
China had the world's best-performing stock market last year, with the Shanghai composite soaring 130 percent.
Now, just two and a half months into 2007, share prices are up 14 percent in Shanghai and have risen 26 percent in Shenzhen.
The run-up in many ways mirrors the blistering pace of economic growth in this country, which has forced the government to raise interest rates several times in recent months in the hopes of cooling things off.
Analysts say that there are no economic factors they can see which would deal a severe blow to the market here, and that corporate profits are strong.
But some analysts worry that a slowdown in the United States could be a factor, since China's economy is so heavily dependent on trade with the United States and Europe.
For now, though, share prices are rising so fast that the market regulators in Beijing are worried that heavy trading volumes could destabilize the brokerage system.
But along with investors, Chinese entrepreneurs and brokerage houses are reaping huge rewards from the share gains and hot initial public stock offerings in Hong Kong and Shanghai.
The market is so hot that regulators here recently barred companies from raising money on the stock market and then plowing those proceeds back into the stock market.
Expat Village is edited and published by
Iain Williams in Caracas, Venezuela.
