Economist: Stock market not to turn bearish

Updated: 2008-03-03 13:35

China's stock market, despite its fluctuation, will not turn bearish, said renowned Chinese economist Li Yining ahead of the annual session of the country's top advisory body.

"The stock market was bullish last year in general. But as the split-share structure reform has drawn to an end, it may undergo correction," said Li, 87, who is a member of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

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Stock market growth will be one of the focused topics among the country's political advisors, who will meet Monday afternoon for their annual full session at the Great Hall of the People in central Beijing.

China saw a round of bull stock market in 2007, with the key benchmark Shanghai Composite Index soaring from 2,728 points on January to 5,261 points, or 92.85 percent, on December 28.

In fact, the market has been on a bullish run for 29 months from June 6, 2005 to November 2007, longer than the general bullish market cycle of 17 to 24 months.

But it has dipped since last November, interlaid by several upturns that failed to turn the scale.

The Shanghai stock exchange closed at 4,349 points last Friday, the latest trading day, which was 1,775 points, or 28.98 percent lower than the historical record high last October 16.

"The plunge was mainly caused by investors' jitters over the influence of the American subprime crisis, the macro control measures to cool the sizzling economy and refinancing plans of companies to be listed," said the economist, adding that lack of experience of the new-comers also fueled their anxiety.

An example is the mammoth trading debut by PetroChina last year, which was blamed to worsen the downward slump of Chinese share prices. On news of PetroChina's listing, China's major stock index dropped 2.31 percent on November 2.

There are two factors signaling whether a stock market is to turn bearish, according to Li. One is economic recession of a country and the other world influence to the country's stock market.

"China's economy is still on the rise, although the growth rate may slow down a little this year," He said. "The world stock market is not bearish and its influence to China's not-so-open stock market is limited."

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