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Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.Greater China
Aug 13, 2005

Chinese bourse enjoys sharp gains

BEIJING - Chinese stock markets closed higher August 11 with major stock indices reaching new highs since early June, when major indexes of the Shanghai market dropped below the 1,000 point level. Major blue chips, such as Sinopec, China Unicom and banking shares, continued to rise August 11. Their share prices have gone up by up to 40%, which contributed significantly to the rising indices.

The benchmark Composite Stock Index of the Shanghai Stock Exchange, which covers yuan-denominated A shares and foreign-currency B shares, rose to 1,183.58 points, up 1.59% from the previous trading. The Component Stock Index on the Shenzhen Stock Exchange closedat 3,128.42 points, up 2.14% from Wednesday. Total volumes of shares traded on the markets stood at 28.2 billion yuan (US$3.48 billion), also a record high in the past few months.

Hu Jun, an analyst with Guotai Junan Securities Co, said the pressure on the stock markets is growing rapidly for downward fluctuation as the Shanghai composite index approaches the 1,200 point level. Chinese stock markets, which were created 15 years ago, have fallen continuously since 2001. Poor corporate governance and split share structure problem have been blamed as major problems for the sluggish market performance.

The split share structure refers to the existence of a large volume of non-tradable state-owned and so-called "legal person" shares, which have constituted about two-thirds of the shares of the firms listed on China's two stock markets. Starting in early May, China launched an experiment to tackle this problem so that those state shares will be eligible for floating on the markets after majority stockholders pay compensation, typically around 30% of the shares, to minority stockholders. Some analysts consider the recent rises to be at least partly due to the split-share structure reforms, which were intended to increase confidence in the market's long-term potential.

The Chinese economy has been growing by an annual average of 9.4% for the past 27 years, while the domestic stock markets, far from being an economic barometer, have plunged by half during the past four years.

(Asia Pulse/XIC)