Analysts warn of state-driven bubble in 'twisted' market

July 14, 2015 10:13
Cheung Kai-cheong says recent one-way measures that only favor the upside have shaken investor confidence. Photo: RTHK

Foreign investors may take a year to regain confidence in Chinese stocks after government intervention to stop a rout twisted market fundamentals.

Recent one-way measures by the government that only favor the upside have shaken investor confidence, Cheung Kai-cheong, CITIC CLSA Capital Market Ltd. general manager for China research, was quoted as saying by the Hong Kong Economic Journal.

The Shanghai Composite Index may hover around 3,300 to 4,500 points in the short run after a ban on short selling, coupled with increased margin financing.

However, the longer term prospects for the stock market depends on how well the government exits these supportive measures, he said.

Eddy Loh, an equity strategist for Asia and the Middle East of Barclays Global Investment, warned of a government-driven market bubble which could impact both domestic and foreign investors.

[Chinese version中文版]

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Hong Kong Economic Journal