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Markets hit four-year low despite recovery

By Wang Xinyuan (Global Times)

13:56, November 29, 2012

The benchmark index of China's A-share market hit a 46-month low Wednesday, fueling investors' pessimism despite positive signs showing the world's second largest economy is in recovery.

The A-share benchmark Shanghai Composite Index fell below 2,000 mark to 1,991.17 Tuesday, back to the level of January 2009. The index dipped further to 1,973.52 Wednesday, down 0.89 percent from Tuesday's trading. The Shenzhen Component Index, another key benchmark, also slid 1.04 percent Wednesday from the previous trading day.

The benchmark indices have been trending downward since May, with an overall fall of 20 percent, while major indices of the US and European markets, including the S&P 500 and Germany's DAX 30 and French CAC 40 increased by between 2 to 12 percent during the same period.

The total market capitalization of the A-share market totaled 24.35 trillion yuan ($3.9 trillion) in early May, but had plunged to 19.8 trillion yuan on Wednesday, a loss of 4.6 trillion yuan had gone in seven months.

Only four out of 100 retail investors with A-share accounts traded on the market last week, according to China Securities Depository Clearing Corp's latest statistics, indicating sluggish trading and investors' reluctance to participate in markets.

"US stock indices have rebounded to around pre-crisis level while China's stock indexes are less than one-third of the level before the crisis," said Lin Yixiang, founder and chairman of China TX Investment Consulting Co Ltd.

A major reason for the sluggish market is that investors are still concerned about economic growth prospects, despite recent economic data from the Purchasing Manager's Index and power consumption showing that the economy is improving.

"Their concerns are not dismissed as they haven't seen effective policies and reforms to break the monopoly of State-owned enterprises, to tackle the imbalance of wealth distribution, or to deal with corruption which impedes the healthy growth of the economy," he told the Global Times Wednesday.

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