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By Pehon | July 24, 2007
I’ve extracted an article from the Business Times - 24 July 2007, as i believe what has happened to China on the 23 July 2007 is a good example to the rest of the world.
Right now, the world market is worried with the American’s Subprime and inflation problems. However despite the constant worry, we see the bulls and bears jostling for the thrend in the market (though we see the bulls winning the race thus far).
But what we have seen in the Chinese market shows us
the market is dominated by liquidity. Despite a rate hike, the market still closed significantly higher on Monday. Unlike all the bears in the US market shouting about a rate hike that never came so far. Yes, the concerns are still weighing down on the general upward thrend of the global market, with the large 1 day drops from time to time, but this really shows that the market is pricing stocks with that in mind.
As what many people are claiming now, the market is overpriced with so much concerns globally. However, I think the global market has never seen liquidity like what we are seeing now. Money is flowing from the Arabs and the Chinese. The concerns we are seeing are just short to medium term pressure on the general bull market.
China shares soar despite rate hike
Shanghai Composite Index closes 154 points or 3.8% up at 4,213, within sight of 4,272 record high in May
(SHANGHAI) Chinese share prices closed sharply higher yesterday, adding 3.81 per cent, to be back within sight of record levels as investors shrugged off a third interest rate hike this year, dealers said.
With last Friday’s rate announcement totally discounted, the market focused on the red-hot banks amid expectations of strong earnings while steelmakers drew interest on bargain-hunting following recent falls, they said.
A very sharp rise in volumes indicated that investors had already factored in the central bank’s latest effort aimed at cooling roaring economic growth, they added.
After the market closed last Friday, the central bank announced its third hike in interest rates this year but the increase of just 0.27 per cent was far from the draconian measure some had feared.
A quick rate hike had been widely predicted after the government said last Thursday that the economy grew a blistering 11.9 per cent in the second quarter and the consumer price index, the main gauge of inflation, jumped to 4.4 per cent in June from 3.4 per cent in May. The government also cut the withholding tax on interest from bank deposits to 5 per cent from 20 per cent, a move designed to encourage savers to keep their money in the bank rather than risk it on the markets.
The benchmark Shanghai Composite Index, which covers both A and B shares listed on the Shanghai Stock Exchange, closed up 154.51 points or 3.81 per cent at 4,213.36, finishing within sight of the record close of 4,272.11 posted on May 28.
Turnover rose to 154.33 billion yuan (S$30.77 billion) from 104.71 billion yuan last Friday.
The Shanghai A-share Index jumped 161.86 points or 3.8 per cent to 4,419.95 on turnover of 152.34 billion yuan, while the Shenzhen A-share Index surged 59.46 points or 5.07 per cent to 1,231.88 on turnover of 75.06 billion yuan.
‘The market had anticipated the interest rate hike, so no negative impact was seen today,’ said Zhu Liang, an analyst at Dongwu Securities.
Wu Ang, an analyst with Citic Securities, said that investors were returning to the market after digesting the policy changes and shifting their focus to strong corporate earnings outlooks.
‘Investors moved back to the market, betting that rapid economic growth would boost listed companies’ earnings,’ said Mr Wu. — AFP
Topics: Indexes&Economy |
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