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Business
Print Edition> Business
UPDATED: January 11, 2009 NO. 3 JAN. 15, 2009
Expecting a Stock Market Recovery
Abundant liquidity is expected to be the mainstay that helps to prop up the nation's stock markets, according to the Economic Information Daily's review of financial institutions' research reports. Excerpts follow
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LOOKING GOOD: A majority of financial institutions expect mainland stock markets to recover in 2009, after heavy losses last year. The photo shows investors watching share price movements at a brokerage firm in Beijing 

After painful losses in the stock markets last year, how will the stock markets develop this year? At the end of 2008 and in early 2009, more than 20 securities companies and the same number of fund management companies published their investment strategy reports for 2009.

The majority of those financial institutions stated that despite many uncertainties in the macroeconomy this year, the government's resolution to restore economic growth is unshakable. As a barometer of the macroeconomy, the mainland stock markets will recover half a year ahead of the real economy. They all expect a strong rebound in the second half of this year and believe the government's stimulus plans will bring many structural investment opportunities in the A-share markets.

Stock index projection

Most of the financial institutions enthusiastically expect a good year in the stock markets.

Judging from the already published reports, a few financial institutions, such as Galaxy Securities Co. Ltd., Guotai Jun'an Securities Co. Ltd. and Bohai Securities Co. Ltd., are optimistic about the stock markets' performance this year and believe that the Shanghai Composite Index's (SCI) low of 1,664 points-its lowest level in 2008-is the bottom line.

Galaxy Securities is the most optimistic of all. It says the current A-share markets are undervalued and will resume their true value in the second half of 2009. It estimates that the benchmark SCI will fluctuate between 2,500 and 3,000 points.

Guotai Jun'an Securities believes there will only be structural investment opportunities in the first half of 2009, but expects a major recovery in the second half after the government stimulus measures take effect, the property market is restored and international markets take a turn for the better. It expects the SCI to swing between 1,800 and 2,800 points.

Bohai Securities says 2009 will be a turning point for the A-share market and expects SCI flows between 2,000 and 2,800 points.

Even though the mainland A-share markets have undergone a sharp correction period in the past one and a half years, there are still many financial institutions that hold pessimistic views.

China Securities Co. Ltd. estimates that the SCI will fluctuate between 1,200 and 2,700 points-1,200 is the lowest estimate of all the financial institutions. Southwest Securities Co. Ltd. says the SCI could fall to around 1,400 points. China Merchants Securities Co. Ltd. believes that mainland stock markets will move back and forth for a long period in 2009, but gradually will recover in the second half with the SCI fluctuating between 1,400 and 2,700 points. China International Capital Corp. Ltd. argues that risk in the mainland stock markets still exists and major indexes could drop a further 10-20 percent. Central China Securities Holdings Co. Ltd. maintains that the middle of 2009 will be the darkest period for the stock markets and expects the SCI to fluctuate around 1,300 to 2,900 points.

Hoping for a "V" turn

Gao Shanwen, chief macroeconomist at Essence Securities Co. Ltd., believes the national economy will have a robust rebound in the second half of this year and that the 2009 economy will assume a "V" pattern, although growth in the second half might be modest.

Gao says economic growth and company profitability are still on a downward track and will keep deteriorating. The downward trend is expected to reach rock bottom in the first quarter of this year at the earliest, but the economy will rebound vigorously in the second half of this year at the latest.

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