Support capital market needed with important decisions
According to ten top economists in a joint plea to the central government, in order to materialize the 4 trillion yuan stimulus package and shore up China’s economy, decisive and coherent policy measures to revitalize the equity market are needed.
As the barometer of the country’s economic and social conditions, the bad situation of the Chinese stock market may bring serious damage to the banking and fiscal systems as well as listed companies. The country’s domestic consumption and investment can be stimulated by revitalization of the stock.
There was no effective policy to stabilize the volatile financial market in the stimulus package so they look for more moves for this sector, said Wu Shiqiu, a professor from Renmin University of China, who is also among the ten economists.
If the authorities don’t activate the market within the fourth quarter itself before the companies release their annual financials, the government will have to pay more to support the market and shore up investor confidence, they said.
Suggestions also come from the economists who hold the opinion that big shareholders, who possess 5 percent or higher stake of nontradable stocks to set a minimum price, below which share sales should not be permitted.
However, some industry insiders said that because the economic fundamentals are still not strong enough, the proposal, which needs to be supported by prompt system innovation on the equity market, does seem to be feasible now.
Based on the analysis from Zhong Hua, an analyst at Changjiang Securities, China’s stock market turned reasonable when the index slips under the level of 2000 points. Therefore a recovery can only come when the fundamentals ameliorate rather than via any direct stimulus policies to the market.
He explained that authorities’ move might help index in a short time, but when the real economy is deteriorating, the help from authority won’t be useful.
No one knows how much capital we need to help the recovery of economy, said Chen Xian, an economist from Shanghai Jiao Tong University, “Policies like raising personal income threshold and issuing consumption coupons to the lower-income and retirees sound more feasible to stimulate domestic consumption.”
The benchmark Shanghai Composite Index led by rally in bank and property stocks with rising percentage of 1.25 to close at 1894.62 points on Dec 1st.
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