A-share market set to further buoy confidence

Upward momentum expected to be consolidated by new round of measures

An investor looks at share prices at a brokerage in Fuyang, Anhui province. (Photo by Wang Biao/For China Daily)

Following the A-share market's recent robust recovery buoyed by a number of stronger-than-expected stimulative policies, increasingly confident investors are attaching more attention to the stock market, whose upward momentum can be further consolidated by more supportive measures and the ongoing optimization of China's economic growth, said industry experts.

Preparations were made during the National Day holiday, which ended on Monday. The Shanghai Stock Exchange announced on Sunday that it will add an extra five minutes, from 9:25 to 9:30 on each trading day, for designated transactions. The new policy will take effect on Tuesday, the first trading day after the holiday.

As explained by industry experts, a designated transaction is a step that an investor must take between opening a new stock account and commencing trading on the SSE. The latest adjustment at the SSE has been made to address the surging number of newly registered retail investors over the past few days and to facilitate trading efficiency once the market resumes, they said.

The market's upbeat sentiment can be felt at securities brokerages. Leading brokerages provided round-the-clock online account opening and consulting services during the recent holiday. Sinolink Securities said the account opening appointments they received during the holiday jumped 150 percent from a month earlier. Minsheng Securities said the number of daily requests for opening stock accounts over the past seven days was four times the amount before the holiday.

To meet such surging demand, the securities account platform and identification information checking system at China Securities Depository and Clearing Co resumed operation on Sunday and Monday.

Investor confidence has been supported by the A-share market's recent strong rebound. Ever since the batch of incremental policies was introduced on Sept 24, the Shanghai Composite Index gained 20 percent by the end of September, with the Shenzhen Component Index up 29 percent. The combined trading value at the Shanghai and Shenzhen exchanges hit a new single-day record of 2.6 trillion yuan ($370 billion) on Sept 30.

Laura Wang, chief China equity strategist at Morgan Stanley, said on Oct 3 that Chinese equities will gain another 10 to 15 percent on average if a new round of fiscal expenditure measures can be released in the following weeks.

At a news conference scheduled for Tuesday, officials from the National Development and Reform Commission, the country's top economic regulator, will explain their measures to better implement the range of supportive policies released in late September, in order to further advance economic growth and optimize China's economic structure.

Yang Delong, chief economist at First Seafront Fund, said the 140-trillion-yuan Chinese household savings will provide more capital for the A-share market after the National Day holiday, providing more upward impetus for the indexes.

The increase in the Hong Kong stock market has already overtaken that of the A-share market as the latter took more days off for the holiday, said experts at Shenwan Hongyuan Securities. Therefore, a continued rally can be expected from the A-share market in the short run to narrow the price gap with Hong Kong, they added.

Dai Kang, managing director of the development research center at GF Securities, said private equity investment funds have increased their exposure to the A-share market, which has just seen the strongest rebound in months. Chinese policymakers have smartly used the time window of interest rate cuts made by the US Federal Reserve to introduce stronger-than-expected supportive measures, he said.

Goldman Sachs upgraded its call on Chinese stocks to overweight, saying that recent stimulus measures have bolstered confidence, and Chinese equities' valuations are below historical averages while their earnings could further improve.

Qiu Xiang, joint chief strategist at CITIC Securities, said that the current A-share market rally is mainly supported by reversed market expectations, as a result of the innovative monetary policies and a relaxed grip on the property market announced in late September. A further market recovery can be expected, with companies showing improving earnings and those benefiting from a recovery in domestic demand offering more opportunities to investors, he added.

Analysts from Huafu Securities also warned investors of the possibility of adjustments and fluctuations in the A-share market after it experienced a drastic increase. But the recent bull run is far from its end. The overall rise will last longer, they said.