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Stock dives confuse investors
By Mao Lijun (China Daily)
Updated: 2008-04-14 11:44 But, Wang Qian, a business journalist who has lost about 400,000 yuan 45 percent of her family's stock portfolio in value since the fall, says she isn't pulling out. "I think the market will not collapse before the Olympics," Wang says. "All my friends have lost a lot of money in this round. The stocks dropped too much, and we have no idea why it happened with the Olympics round the corner," she says. It may be hard for ordinary investors like Wang, who entered the market in 2006 and tasted instant success, to understand why the market is playing truant. But although Olympics can boost market sentiments and even company earnings, its effectiveness is very limited and investors should not have unrealistic expectations of its impact, say experts. According to HSBC Strategist Garry Evans, stock markets of Olympic host nations often follow a rise-and-fall pattern. The equity markets in nine of the last 11 Olympics stretching back to Tokyo in 1964, fell an average of 6 percent in the three months leading up to the Games, according to Evans' report. And for a large country such as China, the impact from the Olympics on the economy and the equity market will be even less. Plus, there are multiple variables and uncertainties that drive stock markets. One of the important variables this year is the slowing of US and European economies, its impact on the Chinese exporters and the squeeze in the global financial markets. There have also been other unforeseen factors denting investor confidence, such as the recirculation of the so-called non-tradable shares on the market, the soon-to-be-launched stock index futures and a possible reform of the initial public offering (IPO) pricing system. Such market uncertainties are coupled with the government's battle against inflation and the resultant tightening credit policy that has spawned serial interest rate rises. With so many of these other factors coming into play, analysts and economists are now split in their market predictions before the Olympics. While some say the market will regain momentum before the Olympics and maintain an upward trend in 2008, others hold a more pessimistic view. Even Andy Xie, former chief economist at Morgan Stanley, who used to be optimistic about the market in the run-up to the Olympics, has begun to suggest it might be a good idea to sell before the Games. Confused, ordinary investors are living on the hope that the government won't allow the market to crash and "spoil" the Olympics, and will somehow miraculously revive it. (For more biz stories, please visit Industries)
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