Stock Markets Soar after Positive News

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Last updated at: (Beijing Time) Tuesday, June 25, 2002

Stock Markets Soar after Positive News

Stock markets in Shanghai and Shenzhen rocketed sky high on Monday after hearing the State Council's call for a stop to the sale of State-controlled shares in listed companies. Analysts believe the positive news is the driving force behind Monday's market performance.

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Stock markets in Shanghai and Shenzhen rocketed sky high on Monday after hearing the State Council's call for a stop to the sale of State-controlled shares in listed companies.

The Shanghai Bourse closed at 1707.31, surging 144.59 points, or 9.25 percent; while the composite index of the Shenzhen Bourse rose sharply by 42.54 points, or 9.05 percent, to close at 512.38 points. The combined volume of the two markets reached 89.8 billion yuan, one of the highest for a single trading day in China's stock market history.

Analysts believe the positive news is the driving force behind Monday's market performance. The State Council announced its decision to stop selling State-owned shares in listed companies onSunday, and the China Securities Regulatory Commission also issueda notice to further regulate new issues by listed companies. The news boosted investors confidence and helped drive outside capitalinto the market.

State-owned shares have long been a sore point for both investors and the government. In China, some 60 percent of the shares in listed companies are controlled by the State and cannot be traded on the market. With the progress of China's market-oriented economic reforms, it is essential for the State to move out of these companies.

In June last year, a trial plan for selling off State-owned shares was implemented. This immediately sent investors into panicand the representative Shanghai index dropped from over 2100 points to a low of under 1400 points. The bearish mood remained for more than one year, seriously affecting the markets' capital-raising function.

Wu Xiaoqiu, director of the Financial and Securities Research Institute under the People's University of China, said that the latest move by the State Council is the right choice. It is of great significance for the government to reduce its holding of shares. It is a correct move, but the current capital market conditions are not mature enough to deal with the selling of the shares.

Tang Zhenbin from the Galaxy Securities Firm said that investors have had very hard times since last June and the positive news has helped them get rid of a heavy psychological burden.

China's savings deposits have exceeded eight trillion yuan, corporate money is also quite substantial and the capital source for the markets is adequate, so a new round of market growth is possible in the second half of this year.

Analysts think that the surge on Monday heralds a turning pointfor the market, and an improved market environment will ensure thelong-term steady development of the market.

They believe that since the beginning of this year, China's securities regulatory departments have stepped up market supervision. The information releases from listed companies are increasingly standardized and their transparency is mostly improved.

Now illegal practices on the market are being severely punished,and some who have maliciously manipulate stock prices are being prosecuted. These actions are added positive factors for investorsand the long-term development of the market.

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