BEIJING, Sept. 3 (Xinhua) -- China's smaller Shenzhen bourse has warned
investors of bubbles behind the soaring profits of its main board market.
By the end of August, 487 out of the 488 listed companies on the main board
of the Shenzhen stock exchange had released their interim reports, with combined
net profits standing at 47.5 billion yuan (6.25 billion U.S. dollars), almost
double those recorded at the same period last year.
The Shenzhen stock exchange, which is only less than one third of the
Shanghai bourse in terms of market capitalization, has a total of 632 listed
"Although listed companies achieved rapid growth, investors should still
beware of hidden bubbles behind the profit surge and invest in a prudent and
rational manner," said the report released on Sunday.
According to the report, the interim profit figures relied too much on
yield of investment in the securities market and the prospects of a continued
profit increase is doubtful.
The contribution ratio of business revenue to profit fell 27 percent
year-on-year while that of investment yields to profit soared 50 percent, said
Meanwhile, the corporate shares index grew much faster than the business
revenue and net profit.
The main-board shares in the Shenzhen market were valued at 42 times the
earnings. U.S. investment bank Goldman Sachs earlier warned that if the
price/earnings ratio exceeds 25 times, share prices are over-valued.
Besides, 138 companies saw lower half-year profits compared with the same
period last year and another 100 are still in red, the report said.
China's stock market rose to a new high on Monday, with the benchmark
Shanghai Composite Index up 1.96 percent to close at 5,321.06 points, and the
smaller Shenzhen Component Index rose 1.63 percent, or 291.93 points, to end the
day at 18,164.04 points.
The continued rise of the market has aroused concern among the securities
regulators, who have been striving to maintain stability.
The China Securities Regulatory Commission (CSRC), the country's securities
market watchdog, has announced the conclusion of a three-year comprehensive
overhaul of the country's securities dealers to reduce operation risks.
Shang Fulin, head of CSRC, said that 19 companies were shut down and
several others had their business licenses suspended. He said 104 securities
companies in operation nationwide were up to standard.
Vice President Xi Xiaoming of the Supreme People's Court of China was
quoted by Caijing Magazine on Monday as saying that law makers were deliberating
upon the revision of the Securities Law, requiring those who engage in insider
trading and price rigging to bear civil responsibility, such as returning
properties or paying a penal sum.
Although related judicial interpretation is still being drawn up, courts at
various levels can still receive such cases.