By Li Zengxin (chinadaily.com.cn)
Updated: 2007-08-29 16:34

Sources said earlier that the first batch of the special treasury bonds worth 600 billion yuan is expected to be issued by the Ministry of Finance to the central bank via the Agricultural Bank of China as an intermediary today with interest rate at 4.3 to 4.5 percent, depending on their maturity periods.

As to news that another 200 billion yuan such bonds will be directly issued to the market, sources are divided on its authenticity. But even if it is true, experts believe the actual impact to the stock market is less than its psychological influence. Most analysts believe indirect impacts to the stock market could arise from the reduced liquidity in the economy.

In addition, some of the bonds will be purchased by institutional investors including the national social security fund and insurance companies. The proportion of bonds directly reaching the individual investors will be rather small.

Starting from 4,300 points on August 1, the Shanghai index grew 20 percent in less than one month before yesterday. Institutional investors became the major force in the new round of growth. The 56 mutual fund managers, controlling 323 mutual funds, have so far finished revealing their half year results. They had a realized net return of 363.96 billion yuan and an unrealized net return of 126.9 billion yuan. The total surplus was two times as large as the whole of 2006, according to the China Securities News.

Mutual funds have distributed 129.95 billion yuan in the first half, representing a high profit distribution ratio, said analysts. The proportion of capital in mutual funds from individual investors has also increased dramatically, said TX Investment Consulting.

On the other hand, many analysts believe growth in share prices was too fast, regardless of the fact that the earnings per share of all the listed companies reached 0.1751 yuan, up 65.64 percent year on year by August 4.

The high speed of growth in the major indices was largely due to rising large cap, heavyweight blue chips. The higher their prices, the less room for them to climb further. In addition, the average price to earnings ratio in the two stock exchanges was close to 40, making mainland stocks the most expensive shares in the world. "Cashing out futures earnings can not be sustained undefinitely," said an analyst.

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