Confidence in stock markets still low

With stock markets in the Chinese mainland far below a record high reached six years ago, investors still lack confidence in the markets, experts said Thursday.

On October 16, 2007, the Shanghai Composite Index hit 6124.04 points. It closed at 2,188.54 points on Thursday.

"In recent months, some stocks that are likely to benefit from financial reforms or that are related to the Shanghai Free Trade Zone (FTZ) performed quite well, but that was mostly due to speculation," Guo Yiming, a senior analyst at Shaanxi Jufeng Investment Information Co, told the Global Times Thursday.

According to a report by the 21st Century Herald on Wednesday, investment bank JP Morgan downgraded China's A-share market to "underweight" Tuesday, mainly because fast-growing enterprises in China are overvalued and the country's economic growth has been slowing down.

"Another factor is investors' concern about a further rise in inflation or potential policy tightening in the coming months," Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times Thursday.

China's consumer price index, the main gauge of inflation, rose by 3.1 percent year-on-year in September, the highest level in seven months, according to data released Monday by the National Bureau of Statistics.

In addition, it's time for listed companies to release their financial reports for the third quarter this year.

"But the rise in labor costs and other operation costs for enterprises has made investors concerned about companies' performance in the third quarter this year," Dong said.

Concerns about a potential debt crisis in the US have also contributed to uncertainty over the recovery process of the Chinese economy, Dong noted.

The head of the China Securities Regulatory Commission called on Wednesday for greater protection for retail investors in the A-share market, in order to boost investors' confidence.

But it will be difficult for investors to maintain positive sentiment toward the market in the following months this year amid so much economic uncertainty, said Dong.