Mainland market ranks among world's worst again
The mainland's roller-coaster stock markets rejoined the ranks of the worst performers worldwide in 2010, two years after a bumper 65.4 per cent annual decline made the Shanghai bourse the second-biggest loser after Russia.
The Shanghai Composite Index lost 14.3 per cent last year, making it the third-worst-performing bourse worldwide and bucking the global trend of market recovery.
Among global powerhouses, the mainland's market was the worst performer. The index's loss, following an 80 per cent gain last year, was eclipsed only by the markets in Greece and Spain.
Greece's ASE Index lost 66 per cent and Spain's IBEX 35 index 17 per cent last year.
In the Asia-Pacific region, Indonesia's Jakarta Composite Index was the top performer of the year, jumping 46.1 per cent.
The poor performance of the Shanghai index fuelled criticism by retail investors that the government-orchestrated market is not helping small investors profit from the mainland's economic growth.
'The record number of initial public offerings siphoned off a large sum from the market,' said Kingsun Investment Management analyst Dai Ming. 'It was yet another weird year when China grew but the market didn't - a market with Chinese characteristics.'
Yesterday, the Shanghai index added 48.5 points, or 1.76 per cent, to close the year at 2,808.08. The Hang Seng Index, meanwhile, edged up 0.16 per cent to 23,035.45 in a shortened session, chalking up a 5.3 per cent gain for the year.
Beijing approved 347 IPOs on the A-share market in 2010, which raised a total of 483.1 billion yuan. The People's Daily said the IPO bonanza exacerbated the market's weakness while the regulator ignored the interest of the country's millions of retail investors.
In July, the key Shanghai index was nearly 30 per cent off last year's close. In stark contrast, the mainland's economy grew 10.6 per cent in the first three quarters of this year.
Analysts said the annual loss of the index partly resulted from a hefty gain last year when speculative capital sloshed about the volatile market because of easy credit. Beijing started to tighten its monetary policy in 2010, fearing an asset bubble and soaring inflation.
The contrasting performances in Shanghai and Hong Kong meant that the A shares of mainland companies listed in Hong Kong traded at a 1.19 per cent discount to their H-share counterparts yesterday. A shares have generally been more expensive than H shares in the past, benefiting from ample money supply.
Beijing is expected to roll out more austerity measures this year to tame inflation and avoid a hard landing as it seeks sustainable economic development.
'Hong Kong outperformed Shanghai in terms of market performance because global investors allocated more cash to buy Chinese stocks,' said John Tang, a strategist with UBS, referring to the fact foreign investors cannot freely buy A shares.
'Looking ahead, the Hong Kong market outlook is bullish because of the continued optimism on China.'
Most mainland analysts are wary of the A-share market outlook in 2011 because they expect more tightening, which will weigh on skittish investors. 'Investors are still very cautious despite the gain in the last trading day of the year,' China International Fund Management said in a report. 'Overall, the market lacks buying interest.'
Shang Fulin, chairman of the China Securities Regulatory Commission said on Thursday that the Shanghai stock market had recorded a noticeable achievement as it jumped to the world's No2 spot in terms of capitalisation.
But the mainland media argued that the achievement came at the expense of retail investors.
Unlike Hong Kong, the mainland has yet to allow market forces in IPO activities and the regulator paces new listings in accordance with the state of the market. The regulator has, in the past, slowed down IPO approvals and halted new offerings to boost the market when it got sluggish.
