Poor performance will slow stock market
By Fei Ya (China Daily)
Updated: 2006-07-21 08:53
However, excessive money flowing into the capital market will only have a
short-term effect. Fundamental factors including listed companies'
profit-gaining abilities, the effect of stock reforms, mergers and acquisitions,
and restructuring also play key roles in the stock market.
Listed
domestic companies' pre interim reports showed that up untill July 7, 170
companies out of 390 reported losses in the first half year, accounting for
43.58 per cent. Another 46 companies reported a reduction of their profit in the
first six months.
"Actually, listed companies' profits have fallen since
2004, with net profit witnessing a fall. Net profit in the first quarter of 2006
was down 16 per cent compared with the same period of last year." the CITIC
Securities report said.
It said poor performances among listed companies
would certainly not support the increase of index.
"I do not think their
performance will undergo an obvious improvement over the next six months. From
this aspect, the index will not rise much either," said Zhang Qi, an analyst
with Shanghai-based Haitong Securities. "The market will face pressure from
further initial public offerings and other capital raising
activities."
Large companies like the Industrial and Commercial Bank of
China are expected to issue A shares and H shares simultaneously within the
year, probably in September.
Others including Air China and China Mobile,
listed overseas, are claimed to be preparing to return to the home
market.
Though a schedule is not decided yet, the fact that these
blue-chips firms will potentially siphon large amounts of capital will certainly
have a psychological impact on most investors.
Zhang believes the fact
many institutional investors have gained from the first round of index hikes
will make them pause before making further moves.
"But there will still
be some highlights in the second half of this year," said Zhang, adding that
more and more restructuring, mergers and acquisitions among listed companies
will boost their value.
(For more biz stories, please visit Industry Updates)
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