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在线翻译:
szdaily -> Opinion -> 
Behind the stock boom
    2014-12-22  08:53    Shenzhen Daily

    Wu Guangqiang

    jw368@163.com

    SINCE its birth in 1990, China’s stock market has acquired such derogatory monikers as “meat grinder” (implying small investors’ heavy losses in the market), “massive casino,” and “roller coaster,” all of which reveal the highly volatile, speculative, and risky nature of the emerging market.

    All these monikers were recently substantiated once again as the market experienced drastic surges and plummets over a short period of time. On Dec. 9, the benchmark Shanghai Composite Index (SHCOMP) was a typical “roller coaster” show, with the barometer dropping 5.43 percent to close at 2,856.27 after gaining as much as 2.4 percent in the morning session to 3,091.32, an amplitude of nearly 8.5 percent. The combined transactions in Shanghai and Shenzhen hit 1.24 trillion yuan (US$200 billion), the highest since the exchanges started trading in the early 1990s.

    The heart-stopping fluctuation showed that China’s stock market remains wild and woolly.

    The tumble, however, won’t dampen the zeal that has infected tens of millions of stock investors who are scrambling to make a fortune in the long-awaited bullish market. After over six years of a bear market since Oct. 16, 2007 when SHCOMP hit its previously historical peak of 6,124, China’s stock market has embraced an unexpected boom since the middle of the year. Starting from 2,050 points on July 22 this year, SHCOMP began a slow climb upward, and on Nov. 20, began to accelerate, galloping from 2,443 all the way up to 3,041 on Dec. 8, a 24.5 percent increase in 14 trading days.

    The new stock frenzy has resulted in a soaring number of new A-share stock accounts — in November more than a million accounts were added, and in the first week of December, 600,000 more were added.

    Amid the investors’ hectic sentiments, torrents of liquidity are flowing into the stock market. Goldman Sachs predicted that more than 400 billion yuan will be leaving the property market for the stock market.

    As a rule, heavyweights, or blue-chip state-owned giants, are the leaders and early winner of this bullish rise, including China’s four major banks, stock brokerages, insurance companies and oil giants like PetroChina and Sinopec.

    The biggest losers, on the other hand, have been, again, the vast small investors because only a few of them acted quickly enough to buy blue-chip shares.

    Experts are divided over what triggered the sudden rally in the stock market, though they do agree on some apparent factors: the People’s Bank of China’s surprise cut in interest rates on Nov. 21, which, many believe, signaled the Central Government’s resolution to stimulate growth, the launch of the “Stock Connect” link between the Shanghai and Hong Kong stock exchanges on Nov. 17, which helps make China’s stock market more international.

    Many experts and investors argue that the fresh surge has defied weak economic fundamentals. All official indicators have pointed to the weakening economic activities. State media and China’s securities regulator have warned investors not to act recklessly.

    

    But I look at the new “mega bull market” through a more positive lens, with a little caution. In the big picture, seemingly illogical phenomenon have logical grounds.

    First, a healthy and robust stock market is indispensable for an economy driven by innovation and private capital. Alibaba and Tencent’s successful IPOs in the U.S. and Hong Kong, together with numerous American innovative companies’ IPOs, demonstrate the irreplaceable role of well-established stock markets. NASDAQ and Shenzhen’s Growth Enterprise Market (GEM) have given birth to hundreds of high-tech giants. China’s economic “new normal,” which attaches more emphasis on growth quality than on speed, calls for a dynamic capital market.

    Second, after years of efforts by the Chinese securities watchdog to strengthen institutional construction and crack down on illegal activities, including price manipulation, book-cooking, and infringement of minor stockholders’ benefits, China’s stock market is now much closer to the international standard.

    Third, China is undergoing a profound economic upgrading process. New growth points, including robot, energy-saving and environmentally friendly industries, Internet-based consumption and cultural creativity, are flourishing, and they need a robust stock market.

    Nevertheless, risk should never be ignored by watchdogs and investors, minor ones in particular. Greed always comes hand in hand with insanity, followed by disaster.

    (The author is an English tutor and freelance writer.)

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