China's stock market bull run might continue, risks remain

BEIJING - After a booming year, the bull run of China's stock market is expected to continue, boosted by economic and financial reforms in addition to easing measures.

China's stock market has soared over the past year, even as the world's second largest economy has been witnessing a slowdown in growth.

From May of 2014 up to the latest trading day on April 30, the Shanghai and Shenzhen shares surged 119 percent and 103 percent respectively.

In just a year, the average price-to-earning (PE) ratios in the two bourses have jumped to 22.6 and 49.7 from 10.6 and 24. The aggregate market capitalization of the two markets climbed by 138 percent to the current 56 trillion yuan (about $9 trillion).

The world-beating performance of China's stock market is no surprise and this round of bull run started when the central government, on May 9 of 2014, unveiled a blueprint for capital market reform aimed at boosting regulatory transparency and widening market access.

In a wide-ranging statement of policy principles, the State Council said it would develop a system for direct bond issue by local governments, streamline the approval process for initial public offerings (IPOs), and remove some restrictions on financial derivatives.

About six months later, the stock market got a fresh boost when a stock trading link was launched to allow investors in Shanghai and Hong Kong to trade on both bourses.

Rather of being directly linked to China's economic growth, the bull run is a result of multiple factors including ample funds, confidence and policies, Ni Zhengdong, founder of Beijing-based venture fund Zero2IPO Group, told Xinhua.

Since a sweeping economic reform agenda emerged in November of 2013, reforms of State-owned enterprises and the financial sector have been speeded up, and the Belt and Road Initiative and regional integration plans have boosted market morale.

Popular entrepreneurship and innovation, adopted as the new engine for the "new normal" economy, and "Internet Plus" action plan unveiled by Premier Li Keqiang during the parliamentary sessions in March have also boosted investors' confidence in the economy which is undergoing transformation and restructuring, Ni said.