Shanghai's benchmark Composite Index touched a stunning all-time
high of 2,847.62 on the stock market's first trading day in 2007.
Although the index tumbled in the afternoon, it still closed the
day at a point higher than the previous record high set in late
December.
The Chinese stock market's latest bull run that started in
December was mainly triggered by the removal of $250 billion worth
of non-tradable shares and the public listing of such heavyweight
State companies as the Industrial and Commercial Bank of China
(ICBC).
Decision-makers deserve credit for resolving the problem of
non-tradable shares to revive the market, which was in a bearish
mood for most of the past four years.
They designed a reasonable solution to a highly complicated,
difficult problem, an overhang preventing healthy development of
the market ever since its establishment in the early 1990s.
The regulators also showed strong determination in implementing
the plan, which initially was controversial.
The surging market also represented a vote of confidence on the
prospects of the Chinese economy from both domestic and
international investors.
To them, the market seems to be moving to a normal track that
promises to provide a reliable vehicle for investors to benefit
from the thriving Chinese economy.
However, as always, sizzling share market growth prompts growing
speculative activities and attempts to manipulate the market for
illegal profits.
Regulators should have a sense of urgency in mending loopholes
that create room for market manipulation, which could easily hurt
small investors.
Speculation is unavoidable in any stock market.
However, there must also be strong enough voices warning against
exaggerated growth prospects.
A stock market's performance is decided by whether companies
listed there can bring good returns to their investors.
Many investors often forget this in their buying euphoria, only
remembering it when financial reports arrive.
Listing of big banks led by ICBC created a rush of new funds,
which pushed up the market.
The performance of these newly listed corporations could be an
important determinant in the fate of the current bull run.
(China Daily January 5, 2007)