Friday, 20 March 2015 12:45
SHANGHAI: China stocks are on track to post their biggest weekly gain in three months on hopes of further policy easing, but they lost some steam on Friday after a leading analyst warned about increasingly volatility in a “bubbly” market.
The CSI300 index rose 0.1 percent to 3,842.53 points by midday, while the Shanghai Composite Index lost 0.2 percent, to 3,573.86 points. The CSI300 has gained 6.2 percent so far this week.
Hong Kong shares, which were up on Thursday after the US central bank signalled it was not in a rush to raise interest rates, were also softer. The Hang Seng index dropped 0.3 percent, while the Hong Kong China Enterprises Index lost 0.1 percent.
Shenzhen’s Nasdaq-style ChiNext hit record highs, powered by Internet stocks, but blue chip stocks, including banks and energy, took a break after the recent rally.
ChiNext is up 47 percent this year and currently trades at 85 times companies’ earnings, while China’s main stock indexes have hit near seven-year highs.
“It is a bubbly level not seen since the heydays of 4-trillion yuan stimulus,” Hong Hao, managing director of research at BOCOM International said in a note to clients on Friday, referring to the massive economic stimulus programme unveiled during the global financial crisis.
“Could we have learned from the past experience during the bubble years of 2007 and 2009? Could this time be different? Academic evidence appears unfavourable in this regard,” Hong said, warning investors of “surging volatility.”
But some investors were taking relief from increasingly diverging market outlooks.
“People are increasingly cautious over where the market is heading, which means the market is not so crazy,” said Wu Kan, head of equity trading at investment firm Shanshan Finance in Shanghai.
“There will be fluctuations, but corrections won’t be deep, because money keeps flowing in.” Outstanding deposits in securities trading accounts totalled 1.78 trillion yuan ($ 287.81 billion) by the end of last week, the highest since data became available in 2012.
A flood of mutual funds recently launched also provide ammunition for possible further rise in stock indexes, which ended flat on Friday morning.
The mainland stock market has outperformed its Hong Kong peer this year, and are becoming increasingly attractive to foreign investors, analysts said.
Ping An Insurance Group Co of China Ltd jumped 3 percent in Shanghai and 4.8 percent in Hong Kong, after the Chinese insurer announced better-than-expected performance and proposed generous bonus shares to shareholders.
Copyright Reuters, 2015
