Essence Securities notes that the liquidity crunch period-from the fourth quarter of 2007 to the third quarter of 2008-has already ended. As of the fourth quarter of last year, abundant liquidity had come back to the markets and could help increase the values of listed companies this year.

Zhonghai Fund Management Co. Ltd.'s latest research report says the government's investment will start to take effect from the second half of 2009, which will help shore up GDP growth and boost corporate performance.

Analysts noted that stock markets normally become steady three to six months before the real economy recovers. Many financial institutions and economists agree that major economies such as China and the United States might be rejuvenated in the second half of this year. Therefore, it is widely expected that stock market performance in 2009 will be far better than in 2008.

Government investment--a hot topic

Even though financial institutions hold various views on stock market performance this year, they are not at all doubtful about the government's determination to boost growth, and many agree that there are structural opportunities in the markets.

Harvest Fund Management Co. Ltd. believes that A-shares are currently undervalued, and if abundant liquidity could be secured, the A-share markets would be worth investing in. Its research report says the economic policy readjustment will be the major weathervane that guides investors' actions. Government investment in infrastructure, engineering and machinery, medicine, construction material and environmental protection along with a reduction in taxes and income increases are major concerns for investors.

China Merchants Securities agrees that the government stimulus package is the major theme in the first half of this year. The government's stimulus plans plus loosened credit will lead to a liquidity boom in some areas, and listed companies that benefit from government investment can win over investors.

Based on government-stimulated investment and consumption, the researchers at China Merchants Securities created a list of listed companies worth investing in. They say public investment will boost the revenue of railway construction and military-related companies and enhance the financial performance of some cement and machinery companies. Government-guided private investment will directly benefit power and telecom equipment makers and the energy conservation and environmental protection industries. Government investment in people's livelihoods will spur merchandising industries such as pharmaceutical, food and low-end clothing manufacturers. The government's proposals to spur consumption will give rise to more home and auto purchases.

Many financial institutions favor companies that have merger and acquisition possibilities. GF Securities Co. Ltd. determined that between 2006 and 2008, listed companies that conducted acquisitions brought enormous profits for shareholders. GF Securities estimates that cash-endowed industries such as mining, transportation, and food and beverage makers, will probably resolve to expand their businesses by acquiring other companies. Meanwhile, well-performing property, construction and furniture manufacturers, which lack cash, will probably be acquired by industry bellwethers.