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People's Daily Online>>China Business

Monetary easing hopes return after GDP dip

By Wang Jiamei (Global Times)

08:53, April 16, 2012

Rising speculation about the possibility of a monetary relaxation may continue to prop up the Chinese mainland stock market this week, but the room available for further upward movement may be limited as major macroeconomic figures were worse than expected, analysts have said.

The Shanghai Composite Index ended trading at a three-week high of 2,359.16 points last week, up 2.28 percent week-on-week; while the Shenzhen Component Index closed at 10,043.72 points, up 2.63 percent compared with the previous week.

The Shanghai Composite started last week's trading on a drop before seeing four consecutive days of gains, lifted by market speculation regarding possible monetary policy relaxation following the news that Central Huijin Investment had increased its stakes in two State-owned banks and commercial banks had granted lower mortgage interest rates for first-home buyers in some cities.

The trading volume climbed slowly throughout the week, but still stayed at relatively low levels, indicating that investor confidence was still wavering. The two indices recorded a combined turnover of 178.81 billion yuan ($28.37 billion) Friday, up 8.04 percent compared to Thursday.

Although the Shanghai Composite ended above its 20-day and 60-day moving averages last week, mainland stocks continued to register a net capital outflow of 791 million yuan. The securities, property, coal and oil, machinery and insurance sectors received the most capital, while chemical fiber, instrument and meters, and electronic information companies experienced the biggest outflows.

The A-share market is now expecting further fine-tuning of the economy after the release of lower-than-expected GDP growth for the first quarter of this year.

"Most investors believe that in the face of the economic downturn, the government will soon loosen its monetary policy. That's why even though the GDP data was worse than expected, the A-share market still stepped up Friday," Gui Haoming, chief analyst at Shenyin & Wanguo Securities, said in a note.

Nevertheless, analysts pointed out that investors should not be too optimistic because the poor economic indicators will curb the room available for market ascension.

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