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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (19313)	12/22/2004 11:22:45 AM
From: RealMuLan	Respond to of 116555

S&P Sees Buoyant China Shrs In '05 Despite Uncertainties BEIJING (Dow Jones)--China's equity markets are expected to be buoyant next year despite economic and policy uncertainties, Standard & Poor's Corp. said Wednesday. After touching bottom this year, China's shares will likely show a slow recovery in the second half of 2005, said Lorraine Tan, director of research for Standard & Poor's Asia-Pacific Equity Research Services. But share prices are likely to be pressured in the first half by the specters of further rate hikes, a currency revaluation, and new share offerings that could squeeze market liquidity. ADVERTISEMENT On Wednesday, the investment research house issued its equity outlook for China for 2005, noting that domestic consumption remains strong and industries catering to the domestic market are likely to continue to benefit. The report came as the benchmark Shanghai Composite Index snapped a four-session loss to close at a one-week high of 1307.57. Before Wednesday's technical rebound, the index had been trading at three-month lows. Year-to-date, the key share index was off 13%. S&P tempered its outlook due to "complications" that might come from slowing global economic growth, a decline in U.S. demand, continued weakness in the U.S. dollar, and possible overcapacity in certain domestic industries that could raise "risks for China's external sectors in 2005." "There's still a possibility for China to raise its interest rates which could damp the stock market," Tan said at the sidelines of a news briefing. Yuan Change In 2005 Possible She predicted China may raise interest rates by another 100 to 200 basis points in a "gradual" way in the next one to two years. China's central bank hiked key rates for the first time in over nine years in late October as part of efforts to slow rapid economic growth. But Tan said the outlook for the rate-sensitive property stocks remains positive, driven by strong domestic demand. Meanwhile, speculation on a revaluation of the yuan is expected to continue to add short-term volatility to China's yuan-denominated A-share market, Tan said. With the weak dollar and China's economy growing strongly, the yuan has been under increasing pressure to appreciate. S&P in its report said it expects China's government to adopt a trade-weighted basket of currencies to replace the current rigid foreign exchange system which effectively pegs the local currency to the dollar around 8.277. But S&P also said: "The Chinese government is unlikely to want to revalue the yuan meaningfully until its banking sector is strengthened and bad debt is reduced to a more manageable level." Tan said any appreciation is likely to be limited to no more than 6% in the near term, which "shouldn't have great impact on the fundamentals of A-shares." But large initial public offerings expected next year on the domestic stock market could squeeze liquidity, Tan said. Oil giant PetroChina Co. (PTR), along with major Chinese banks like China Construction Bank (CCB.YY), Bank of China (BCH.YY) and Bank of Communications are all expected to launch IPOs on the mainland next year as part of multi-market listing plans. sg.biz.yahoo.com