What global recession? The benchmark Shanghai Composite nearly doubled in 2009.
SHARES IN CHINA ended the penultimate trading day of the decade on a three-day uptrend, with rumors of imminent approval of stock index futures helping fuel a three-day upswing, according to Chinese-language online financial daily Nbd.com.cn.
The benchmark Shanghai Composite Index which tracks leading A-shares rose 1.6% on the day to close at 3,262.60.
Meanwhile, China’s second A-share platform in the southern industrial city of Shenzhen edged up Wednesday by 0.2% to 1,193.90.
The Chinese-language daily said this year- and decade-ending mini bull run will allow many institutional investors to raise their glasses even higher as they bid farewell to “The Naughts” and welcome in “The Teens” or “The twenty-tens”…
Actually, the jury is still out on what to call the years 2010 through 2019, which is representative for many market watchers of just how mixed opinion is on where Chinese stocks are headed this year after 2009 definitely surprised on the upside, closing December nearly double where it started in January of this year.
Without exception, every financial publication in China yesterday surmised on their front – or home – pages that China’s State Council, the equivalent of the country’s Cabinet, was nearing approval of the launch of stock index futures, although none could provide official confirmation or announcement of such a decision.
Although none of these conjectures were based on solid evidence, they had the collective net result of making the markets react energetically, and lifted major indices nationwide.
Due to the ongoing global recession and the somewhat countercyclical behavior of Chinese financial markets over the past year, the country’s securities regulator has been painstakingly putting the prospect of stock index futures approval into a tightly sealed box.
In as many words, it has expressed that the complex financial tool was only to be opened when there existed what it considered to be “more stability and less speculative behavior” in the country’s capital markets.
“If China approves stock index futures next year, no matter how early in the year, this will be a watershed moment for the country’s economic development and will show to the world that China’s financial markets have arrived on the global stage, and are first rate,” the newspaper cited a financial expert as saying.
It added that the arrival of stock index futures will also signify the central government’s confidence in the stability of private enterprise in the country, and will also essentially mark the de facto completion of the ongoing state share reform campaign in which major state-owned enterprises have been endeavoring for the better part of the decade to list major portions of themselves either domestically or in Hong Kong for the most part.
“Leveraged amicable buyouts, takeovers, and non-organic expansion via mergers and acquisitions will be easier among listed entities, and this will help improve the competitiveness and economies of scale for major Chinese firms,” the report said.
Off the charts: The new Shenzhen GEM has a triple digit average P/E. Photo: Internet
Along with both competition and complementariness from the fledgling Shenzhen Growth Enterprise Market (GEM), also known as ChiNext, bourse regulators will gradually loosen capital controls on domestic bourses, give more leeway to existing and potential shareholders, and most importantly liberate more capital to move in and among more investment options to land in the most profitable and promising destinations.
This will allow for more firms to go public without putting undo stress and strain on liquidity, thus ensuring more capital market stability going forward.
The report added that with talk of stock index futures in the air, and the prospects of more investment capital chasing more listed firms this coming year, some of the biggest winners will be brokerages and investment banks.
And if Wednesday’s continued upswing was any indication of this, the auspicious assessment could be quite accurate.
The likelihood of more turnover for more listcos boosted brokerages yesterday, with domestic firms Sinolink Securities rising 3.5% and Guoyuan Securties adding 3.2% on the day.
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