Experts see bright future for A shares

An investor monitors stock prices on his phone at a stock brokerage in Shanghai. [Photo by Lyu Liang/For China Daily]

Despite fluctuations in overseas markets over the past few days, China's A-share market will maintain steady growth for the rest of the year, thanks to the steadily improving profitability of companies, experts said.

The A-share market has already started recovering after a decline in April, they said. There was also a significant difference for the slump in benchmark indexes last month compared with that in 2015.

Chinese investors have matured over time and are now attaching more importance to long-term investment. As a result, there were very few redemptions by mutual funds or private equity firms last month, said Zhang Yidong, chief strategist of Industrial Securities.

Manufacturing companies with global competitiveness will continue to perform strongly on the A-share market, especially those specializing in automobiles, chemicals and new energy. High-tech companies, whose development plans are in line with China's long-term strategies, will also be good investment targets, he said.

The strong prediction for the A-share market comes at a time when major global bourses saw declines on Tuesday after United States Treasury Secretary Janet Yellen said interest rate hikes would be needed to stop the country's economy from overheating.

The US economy has already started gearing up, with the first quarter GDP growth coming in at 6.4 percent. Goldman Sachs anticipates the country's second quarter growth rate to be around 10.5 percent. "Even though the additional spending is relatively small, relative to the size of the economy, it could cause some very modest increases in interest rates," said Yellen.

Though Yellen said that she had respect for the Fed's independence and was not trying to influence decision-making, the Nasdaq tumbled by 1.88 percent on Tuesday. Technology giants saw sharp declines with Apple Inc and Amazon shedding 3.5 percent and 2.2 percent, respectively.

The A-share market, which was closed for three days, will resume trading on Thursday. The Hang Seng Index fell by 0.49 percent on Wednesday, while the Hang Seng Tech Index which tracks the largest technology companies listed in Hong Kong slumped by 2.13 percent.

Zhang said he was not too concerned about the downtrend in global bourses. The rising US Treasury bond yields have approached an end for the time being. Therefore, it will pose no systematic risks to the A-share market, he said.

Yao Pei, chief strategist from Soochow Securities, said robust first quarter results of A-share companies are further indication of the strong economic recovery. Companies listed on the A-share market reported a 53.3-percent growth in net profit on a yearly basis during the first three months of the year, he said.

CITIC Securities analysts said in a recent report that China's rising inflation will only have a marginal impact on market fundamentals and liquidity. Valuation will be the main driver of A-share market performance in May, and the best windows for investment are expected to remain for the rest of the year, it said.