Gloomy markets defy expected growth

Investors lack confidence but some believe reform will boost figures

The Chinese stock market endured one of the world's worst performances this year despite the country enjoying a globally leading economic growth rate and financial institutions raising expectations for the coming months.

A bearish market has plagued Chinese stock investors during the past 11 months. A report from the China Securities Index Co showed that in the six months until November, about 4.41 trillion yuan ($708 billion) has evaporated from the two stock markets in Shanghai and Shenzhen. But, experts say, after the central economic working conference, which opened on Saturday to set the policy stance for next year, some positive indicators will help values rebound. [Yang Wei / For China Daily]

In an apparent contradiction of the modest economic recovery suggested by the recent improved indicators, the benchmark stock index remained lower than 2000 for six days after Nov 27, down by about 11 percent this year.

A report from the China Securities Index Co showed that in the six months until November, about 4.41 trillion yuan ($708 billion) has evaporated from the two stock markets in Shanghai and Shenzhen. Everyone holding the more than 560 billion accounts of A shares has lost 78,700 yuan on average.

As ever in the Chinese market, elaborate charts for economic prediction and meticulous analysis are not as effective as policy signals in changing investment decisions.

Positive statement

The benchmark index surged for two straight days after Dec 4 from the 46-month low point when the Politburo Central Committee of the Communist Party of China released a statement that pledged it would continue to stabilize economic growth.

Existing macroeconomic policies will remain targeted, effective and finely tuned, according to the statement. It vowed to promote urbanization and reforms in the areas of taxes, the price of resources and healthcare.

In addition, the statement also highlighted eight explicit requirements to avoid extravagance and bureaucracy, including cutting spending on official trips and reducing traffic controls during political events.

It is a signal that the new leaders are making efforts to improve work efficiency, said Helen Qiao, chief economist for Greater China at Morgan Stanley.

The statement provides hope for more reforms in the near future and will strengthen market confidence, Qiao said.

On Dec 5, the Shanghai composite index jumped by 2.87 percent, the biggest one-day increase since Sept 7.

"A reversal in the stock market is likely to take place in the short term," said Li Daokui, director of the Center for China in the World Economy at Tsinghua University.

Unreasonable worries on future economic downside risks by investors, especially individual shareholders, have weakened confidence, which was the most important reason for the sharp decline of the stock indexes, said Li.

China's A-share market fluctuates:

Nomura tips rebound for China stocks

Policy pledge triggers rebound in stocks

Stock investors display double vision

Brokers feel chill amid stock market slump