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Stocks make U-turn, finish around critical frontier

By Li Zengxin (chinadaily.com.cn)
Updated: 2007-05-16 16:36

As analysts expected, the 4,000-point has become a key psychological line. It seemed too easy to be broken a few days earlier, and the current price correction around the barrier is normal and helpful to cool the market to some extent, especially the maniac investors. It is itself a good way of education to teach the “amateur” individual investors to think rationally and invest cautiously.

The most apparent feature in China’s stock market is individual investors overthrowing institutions as the larger capital inflow contributor. According to data released by the China Securities Depository and Clearing Ltd, the number of new A-share account opening has been above 300,000 each day for consecutive 5 days till May 14. While over 40,000 new B-share accounts were opened on May 14, the highest in history.

On the other hand, in the first quarter, the qualified foreign institutional investors (QFIIs) were reducing their holdings of mainland stocks by selling shares.

Wind Info, a leading financial services and information provider, said that QFIIs held 2.525 billion shares in 243 mainland listed companies, with a total market value of 36.13 billion yuan. In comparison, the QFIIs held 2.848 billion shares in 187 stocks, with total market value of 30.3 billion yuan in the last quarter of 2006. Although the market value of their holdings increased 6 billion yuan, the number of A shares they held was down 323 million or 11 percent.

Concerning the 36 percent average price increase in the first quarter, if the QFIIs had not been selling shares, the increase in total market value of their holdings should be up 10 billion yuan instead of 6 billion yuan. This gap was most likely a result of QFIIs’ offloading shares, Wind Info said.