BIZCHINA / News
Boom and bust on the road to prosperity
By Jia Hepeng (China Daily)
Updated: 2007-02-05 09:15
At the end of 2006, China recorded 80.06 million stock investors about 4
million more than the United States. Today, 5.9 percent of Chinese are
investors, a number that grew by 10 percent since January 1, 2005.
Currently, more than 80 percent of the Chinese market's tradable stocks
are purchased by individual investors rather than institutional investors.
By the New Year, China had 1,434 domestically listed companies in its
A-Share and much smaller B-share markets. The total market value of the
listed companies was 8.9 trillion yuan (US$1.14 trillion), and the value
of tradable stocks was 2.5 trillion yuan.
By the end of September 2006, China had 57 registered fund management
companies issuing hundreds of funds. Experts believe the amounts of
capital operated by unregistered private funds are much greater than
those generated by registered fund management companies.
Shi Jinyong, a veteran fund manager in Taiyuan, of North China's Shanxi
Province, says that while the market booms today, it has become much more
stable than it was during the last bullish period between 1998 and 2001.
A series of policies have dramatically improved the stock market
environment since last year. One such improvement is the listing of high
quality blue chips, such as the Bank of China (BOC) and the Industrial
and Commercial Bank of China (ICBC). Another is the availability of fully
tradable stocks of listed State-owned enterprises (SOEs). Shi also cites
a series of policies regulating funds and insurance companies'
investments.
He predicts that because of these improvements, the market will grow up
to 5,000 points.
Previously, only 30 percent of SOE stocks could be traded in the market,
but the securities market reforms of 2005 changed the landscape.
It seems that new investors, who usually pursue newly issued blue-chip
stocks like those of BOC and ICBC, are making greater profits.
Statistics from the China Securities Regulatory Commission show that
during the first 10 days of this year, 129,168 new stock investors rushed
to the market daily, while the market index tripled from a year before.
However, they face tremendous risks. Mei Yuxin, a senior economist at the
Chinese Academy of International Trade and Economic Cooperation, said
that the hundreds of billions of US dollars sneaking into the Chinese
stock and property markets push up stock and property prices. But once
the money is taken out, there will be disastrous collapse in these two
markets.
(For more biz stories, please visit Industry Updates)
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