A senior Chinese official has played down fears that bubbles are
forming in the country's stock market, insisting the market's
development is "healthy".
Shares were virtual capital and share prices fluctuated
regularly, said Zhou Zhengqing, a member of the Standing Committee
of the National People's Congress (NPC), the top legislature.
It was normal that bubbles develop on the capital market, and so
long as the bubble was not serious, it would not threaten the
healthy development of the market, said Zhou, who is also vice
chairman of the Financial and Economic Committee of the NPC.
On Feb. 27, the benchmark Shanghai Composite Index, which covers
both A and B shares, plunged 8.84 percent to close at 2,771.79
points, the biggest daily dive since Feb. 18, 1997, when the index
dropped 8.91 percent.
The steep dive has triggered speculation in the subsequent three
weeks that bubbles are developing on the stock market.
Zhou said the "bubble theory" was based on poor market judgment,
and the Feb. 27 dive was just a correction under the market
mechanism.
Zhao ascribed the excessive response to exaggeration of "bubbles
on the Chinese stock market" and rumors about bubbles, and
investors being psychologically weak against fluctuations.
Shares bounced back from the heaviest losses in 10 years on Feb.
28, Zhou said, as the benchmark Shanghai Composite Index surged
3.94 percent, or 109 points to close at 2,881.07 points.
Zhou said the market was still in a period of adjustment, and he
warned investors not to blindly follow experts' analyses, which
could be wrong.
After a four-year recession, China's mainland markets rallied at
the start of 2006, with the main index hitting new highs throughout
the year.
The market growth was still recovering, said Zhou, a former
chairman of the China Securities Regulatory Commission (CSRC), the
market watchdog.
The recovery in 2006 played an important role in supporting the
national economy, Zhou said.
He suggested closer supervision of the capital market and
efforts to educate new investors and raise their awareness of
risks.
The government was aiming for a mature capital market, said
Chinese Premier Wen Jiabao on Friday at the conclusion of the
annual session of the National People's Congress.
"We will continue to improve the quality of the listed
companies, put in place an open, fair and transparent market system
and strengthen oversight of the capital market," Wen said.
(Xinhua News Agency March 21, 2007)