Better times ahead for equities, analysts say

Updated: 2011-12-15 13:44

By Gao Changxin (China Daily)

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SHANGHAI - Stock analysts see a rosier picture for domestic equities next year, after China's top economic policy-setting conference signalled looser monetary and fiscal policies in 2012.

Better times ahead for equities, analysts say


More liquidity, they said, will give investors reason to expect a better equity market performance next year, though some individuals remain skeptical after a two-year bear market has dented their confidence.

On Wednesday, sentiment hit a new bottom as stocks fell to a 33-month low.

"There is a signal of more loosening next year from the top. We see a rebound (in the stock market) next year after a two-year bear market," said Wang Jianhui, chief economist with Southwest Securities Co Ltd.

The annual Central Economic Work Conference, which wrapped up on Wednesday, decided that China will maintain "proactive" fiscal policy and "prudent" monetary policy in 2012, with "fine-tuning" according to economic conditions.

Taxes will be cut "structurally" after fiscal revenue surged past the government's target this year. Lower levies will likely boost domestic demand and the results of listed companies.

Analysts said the announcement, together with a Nov 30 cut in banks' reserve requirements, indicates a shift toward emphasizing the support of growth rather than reining in inflation, which rose a lower-than-expected 4.2 percent in November, a 14-month low.

"If this year's monetary policy is 'tight', then next year will be 'neutral to loose'," said Lu Zhengwei, chief economist with Industrial Bank Co Ltd. "That is definitely good news for the stock market."

Shares opened higher on the central government announcements but retreated in afternoon trading amid lingering concern about a further economic slowdown.

The Shanghai Composite Index dropped 20.07 points, or 0.9 percent, to 2,228.53, declining for a fifth straight day.

Wang said the current losing streak won't last long, and he forecast that the benchmark Shanghai index could rise to 3,000 to 3,500 points in 2012.

"I am bullish on Chinese stocks next year, but how much they will gain depends on how strong the government's easing efforts will be," he said.

Dorris Chen, head of China research at BNP Paribas, told the Bloomberg that Chinese stocks will have a "weak" first quarter but will rebound in the second and third quarters as the central bank loosens monetary policy.

She added that the Shanghai index might gain 20 to 25 percent next year and the H-share index of Chinese stocks listed in Hong Kong might rise to 12,600.

Huang Xuejun, an analyst with Guosen Securities Co Ltd, forecast a sustained rally starting as soon as after the Lunar New Year at the end of January.

However, individual investors are not as optimistic as the analysts. "Who knows if the market has reached bottom? During the last bear market, the index stood below 2,000 points," said Wang Wen, 46, who had more than 10 years of experience in the stock market.

"For me, I think another bull won't come in at least two years."