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Analysts express optimism about Chinese shares
www.chinaview.cn 2006-02-06 11:12:16

    The resumption of share sales may come as early as the second quarter of the year, media reports said, quoting unnamed securities officials.

    So far several Hong Kong-listed mainland enterprises, including top oil producer, PetroChina Co, announced plans to issue stock in Shanghai.

    Among the other factors buoying optimism, analysts said capital available for investment in yuan-denominated stock, including contributions from mutual funds, insurers and foreign financial institutions, is expected to jump this year.

    The mainland's insurance companies may invest as much as 150 billion yuan (US$18.6 billion) in the Shanghai and Shenzhen stock markets this year, up from 84.6 billion yuan at the end of last year, according to an estimate by China Life Insurance Co.

    In addition, 25 finance firms controlled by mainland's biggest state companies had 6 billion yuan eligible for securities investments at the end of last year.

    Overseas institutions have also been given more access to yuan securities after the government said last year it would increase the combined amount they can invest domestically to US$10 billion, up from an initial limit of US$4 billion.

    The mainland has issued a cumulative quota of US$5.6 billion to 31 foreign institutions including Swiss bank UBS AG, Deutsche Bank and HSBC Holding Plc for investments in yuan-backed stock and bonds.

    UBS, Europe's biggest bank, is applying for up to US$500 million of additional quotas to invest in yuan securities, adding to its current US$800 million, said Nicole Yuen, UBS's managing director and head of China equities.

    "We've received overwhelming demand from clients (to buy yuan-denominated securities)," said Yuen. "We'd like to apply for as much as we can."

    At the end of last year, UBS remained among the top 10 shareholders in 24 companies listed in Shanghai and Shenzhen, which include industry bellwether Baoshan Iron & Steel Co and Shanghai Port Container Co.

    One of the key reasons for the optimism by overseas investors in mainland stock is a "closing valuation gap between mainland-listed companies and Hong Kong-listed firms," said Credit Suisse China strategist Vincent Chan. "You can find a smaller gap for bigger and better companies that boast good investment value."

(Source: Shanghai Daily)


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