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People's Daily Online>>China Business

Top regulator confident in China's stock market in 2012

By Zhou Xiaoyuan (People's Daily Overseas Edition)

15:30, January 04, 2012

Edited and translated by People's Daily Online

Investors should have confidence in China’s stock markets, Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC), said on Dec. 30.

China has the world’s second largest GDP, second largest stock market, and fifth largest bond market. More importantly, the country has a number of strong enterprises in the real economy, which have contributed enormously to its rising economic clout. Some of these enterprises have already gone public, and the rest are ready to go public, so investors should be confident in China’s stock markets.

Poor market performance

China’s A-share market has inevitably been affected by the turmoil in global financial markets and economic restructuring at home. Lu Zhengwei, chief economist at Industrial Bank, said that those are just the apparent cause of the bear market.

The root cause lies in the A-share market’s inherent defects and the country’s tight monetary policy in 2011. China has implemented an increasingly tight monetary policy in much of the year. Generally speaking, the stock market is unlikely to show good performance under a tight monetary policy.

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, said that the A-share index recently fell below 2,245 points, and basically bottomed out, providing a good opportunity for value investors.

The A-share market is now at its lowest possible level. The price-to-earnings ratios of many shares, especially of certain blue-chip shares, have dropped between 6 and 8, which is unreasonable and cannot last long. Value investors can take the opportunity to profit from this situation.

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