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Markets set to rise, predicts CICC chairman

By Hu Yuanyuan (China Daily)

15:13, August 28, 2011

China's stock market is approaching its bottom, as the recent slump was triggered by the turmoil in the global capital market rather than a domestic slowdown.

That's the view of the chairman of the country's leading investment bank, China International Capital Corporation (CICC).

"I personally predict that the price of A shares is close to a bottom now after several weeks of declines," Li Jiange, said in an exclusive interview with China Daily.

He added: "The possibility of a double-dip global economic recession remains low."

The main Shanghai Composite Index (SCI) fell slightly on Friday, trimming the first weekly gain in six weeks after losing 2.27 percent the week before.

Despite the weekly rise, however, the SCI remains at a low level. It is valued at 12 times estimated earnings, compared with a record low of 11.57 times set on Aug 22, according to data compiled by Bloomberg. It has lost 7 percent this year as the central bank raised interest rates five times and required lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to curb rising inflation.

Plagued by the sluggish capital market, CICC's net profit slid nearly 70 percent to 130 million yuan ($20.35 million) in the first half of the year, while revenue declined 26.66 percent year-on-year to 1.41 billion yuan, according to the company's interim statement released in July. Other major investment banks also suffered losses due to the market slump.

"Since there are so many uncertainties in the market, our business performance for the rest of the year is hard to forecast," said Li.

That would partly explain why CICC doesn't want to rush into overseas expansion

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