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Stocks may have room to grow as trading week begins

By Yu Xi (Global Times)

09:04, April 23, 2012

The government's plan to cut banks' reserve requirement ratios and investors' expectations about easing in the property market may continue to prop up mainland stock markets this week, but the room available for more upward movement might be limited by uncertainties surrounding the outlook of the global economy, analysts have said.

The Shanghai Composite Index finished trading at 2,406.86 points last week, up 2.02 percent week-on-week; while the Shenzhen Component Index ended at 10,131.04 points, up 0.87 percent compared with the previous week.

The Shanghai Composite started last week's trading on a drop following the US market's downturn, and then was dampened further by fears about the yuan's depreciation after the central bank announced on April 14 that the currency's trading band against the US dollar would be widened to 1 percent, up from the previous 0.5 percent.

On Wednesday, the benchmark Shanghai Composite Index advanced 1.96 percent compared to the previous day, the biggest gain since February 8, on a wave of good news, which included a rally in the US market, South Korea's plan to invest $300 million in the Chinese stock market and the government's strong confidence regarding foreign trade growth in the second quarter of this year.

Then, both indices declined slightly on Thursday before climbing up again on Friday. The two indices recorded a combined turnover of 181.3 billion yuan ($28.83 billion) Friday, up 10.4 percent compared to Thursday.

"The economy won't recover over the short term, and the Shanghai Composite Index will keep waving between 2,200 to 2,500 points in the second quarter this year," according to a China Business News article, citing Wang Xiaoliang, a senior analyst at Shenyin & Wanguo Securities.

Mainland stocks registered a net capital outflow of 7.57 billion yuan last week. The insurance, engineering construction, banks, foreign trade, securities sectors received the most capitals, while the chemical fiber, brewing, food, real estate sectors experienced the biggest outflows.

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