Investment bank report ridiculed as market bulls up

BEIJING -- When Chinese investors celebrated a bullish market on Wednesday, they did not forget to mock a recent market report by JPMorgan Chase & Co.

Chinese bourses made a u-turn on Wednesday after shedding 8 percent in a month's time. The benchmark Shanghai Composite Index went up 2.66 percent, or 59.94 points, to end at 2,317.37, while the Shenzhen Component Index gained 3.14 percent, or 283.93 points, to 9,317.97.

On March 18, JPMorgan released a report advising cutting Chinese stock holdings and betting against the nation's biggest four commercial banks. It downgraded China and recommended bearish drivatives tied to the four banks.

The report became a hot topic among Chinese netizens on Wednesday, especially among investors who use microblogs to discuss investment tactics.

"It's a slap in the face of JPMorgan," microblogger "huayra" wrote on Sina Weibo, a Chinese Twitter-like microblogging platform.

Microblogger "zhongguoshiIPO" wrote "It may not be a plot, but it proves that foreigners really do not know China."

Many microbloggers said it was not the first time for a foreign institution to misjudge the direction of the Chinese market.

In August 2012, when Minsheng Bank published its mid-year report, a number of international investment banks, including JPMorgan, Credit Suisse, Citibank and Fitch, released reports advising shorting Minsheng Bank or downgrading its rating.

Minsheng Bank subsequently led Chinese shares in an overall market rise of more than 20 percent, with the bank doubling the price of its shares.

Discrepancies between the statements made by international investment banks and the actions they have taken have made Chinese investors distrustful of the institutions. Most investment banks are actually buying in while publishing bearish reports, according to a report in Wednesday's China Business News.

In contrast, many Chinese investors believe that big banks are still undervalued, including Luo Yi, chief analyst at China Merchants Securities.

Luo said it is likely that the larger banks' share prices will double in the future, adding that banking shares will have excess earnings of over 20 percent this year.