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Market anxieties expected to keep a tight leash on stock gains

By Yu Xi (Global Times)

08:22, June 18, 2012

Growing confidence in the property market and the government's easing stance on monetary policy may give investor confidence a boost this week, but the room available for more upward movement at the nation's stock markets may be limited by economic uncertainties at home and concerns about Europe's lingering debt crisis, analysts say.

The Shanghai Composite Index finished trading at 2306.85 points last week, up 1.11 percent week-on-week; while the Shenzhen Component Index ended at 9885.65 points, up 1.84 percent compared with the previous week.

Both exchanges started trading last week on considerable increases due to a wave of positive news, such as a rally at the US market during the previous Friday and the release of trade figures which showed that the volume of China's exports and imports grew by 15.3 percent and 12.7 percent year-on-year respectively in May, exceeding market expectations. Investor confidence got another lift from CPI figures for May which indicated that inflation slowed to 3 percent year-on-year last month.

The wind was taken out of the markets' sails Tuesday though, following slumps at US and European markets on revived worries about the eurozone's debt crisis.

News that China's insurance regulators would be allowing domestic insurers' to enlarge the scope of their investments helped the market turn around Wednesday thanks to gains in the heavily weighted sector. Both indices edged up Friday on strong performances from banking stocks, with the Shanghai Composite Index ending the week above the 2,300 point mark.

Mainland stock markets registered a net capital outflow of 8.26 billion yuan ($1.30 billion) last week. The electrical power, insurance, medicine and tourism sectors received the most capital.

The markets' wavering last week indicates that investors are still cautious about the market due to the persistence of many uncertain factors, Gui Haoming, chief analyst at Shenyin & Wanguo Securities, said in a note, adding that the markets will not recover in the short term and the Shanghai Composite will likely continue to fluctuate around the 2,300 point mark in the week ahead.

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