BIZCHINA / Biz Media Digest
Finance:Long-term investment prefered
(China Daily)
Updated: 2007-06-04 13:33
Battered by the increased tax on trading, the Chinese stock market has
reached a crossroad after diving by about 6 percent in three trading days.
Both analysts and investors are no longer as sure as they were when the
market kept hitting record highs in recent months.
Their wavering confidence comes primarily from the unexpected government
move on Wednesday, tripling the stamp tax to 0.3 percent. Some frustrated
investors have taken it as the start of a series of government control
measures that will generate ongoing market declines.
In fact, the government move aims to cool excessive heat. Red-hot trading
brings nothing but unaffordable risks to the market, and the stamp tax
was increased to bring trading within a reasonable range.
The State is not willing - and cannot afford - to trigger a sharp market
decline that would damage all investors.
The market has risen so strongly not only because of speculation-driven
bubbles but because of China's sound economic fundamentals. The Chinese
economy has grown at a double-digit rate in recent years with few signs
of a slowdown.
As a growing number of blue chip companies - the backbone of the national
economy - list on the domestic market, the national economy will continue
to develop quality companies, capital and vitality for the stock market.
The 2005 share-merger reform of State-owned companies brought their
non-traded shares into the market. The reform broke the barrier to
long-term growth of what had been a distorted market. Floating all shares
has increased investor involvement and pushed listed companies to improve
corporate governance.
International excess liquidity, part of which is entering China, coupled
with increasing bank deposits and limited investment channels, has stoked
the fire in the Chinese stock market.
Related readings:
Chinese shares down 3.34% in morning session
Exchanges not to suspend shares with wild swings last week
Investors undeterred by tax increase Stock markets report 5%
capitalization loss
A tax adjustment will not change these fundamentals.
Regulators' paramount responsibility is an orderly market free from
manipulation. It is in individual investors' best interest to adopt a
value-based long-term strategy, one that can ignore losses from
short-term corrections while profiting handsomely in the long-term as
China's market matures.
(For more biz stories, please visit Industry Updates)
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