www.ft.com/cms/s/f2279236-fe5a-11db-bdc7-000b5df10621.html
Sign up to track the latest China news and analysis Bourses in China eclipse all of Asia By Jamil Anderlini in Hong Kong Published: May 9 2007 22:02 | Last updated: May 10 2007 06:11 The value of shares traded on China's stock markets on Wednesday was greater than the rest of Asia combined - including Japan - helping the benchmark index to breach the 4,000 mark for the first time. Analysts said this was almost certainly the first time that turnover at the Chinese bourses had exceeded that of the rest of Asia.
The huge increase is a result of revived retail interest in a market that has climbed 300 per cent in less than two years and continues to defy gravity, in spite of government moves to talk it down. The record turnover was all the more impressive given that day trading is not allowed in China. "Since the start of the year we've seen a surge of retail money flow into the market, and with 300,000 stock accounts being opened every day we will definitely see turnover increase more in the coming weeks," said Isaac Meng, an analyst at BNP Paribas. After such a sustained bull run even the most sober-minded are saying the market can continue to rise in spite of prices that are more than 50 times earnings. One reason is the Rmb20,000bn or so in personal financial assets held by individuals in low-yielding bonds and bank accounts earning less than 3 per cent interest. With inflation now above 3 per cent in China, negative real returns offered by bank deposits are helping fuel the stock frenzy. "Investors will continue to take their money out of low-yielding assets and into the stock market, and that will continue to exacerbate a supply and demand imbalance in the market, which leads to inflated prices," Mr Meng said. While the Chinese market is now the world's second-largest in terms of turnover, it is still less than half the size of Japan's in terms of market capitalisation, with Shenzhen and Shanghai boasting a combined $2,200bn compared to Japan's $4,700bn, the UK's near-$4,000bn and the US's $16,500bn. The main beneficiaries are China's previously bankrupt securities brokerages, many of which had to be bailed out by the government only two years ago.
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