Stocks on Chinese mainland rebounded by over 2 percent on the last day of the past week to end a six-day losing streak. In line with the Chinese government’s continued proactive fiscal policy and prudent monetary policy, analysts take a rosier outlook for China's economy next year.
Due to the dim property market and yuan RMB's consecutive falling, sentiment hit a new bottom as stocks fell to a 33-month low on Wednesday. Even the government's stability-oriented economic policies failed to stop the declining tendency.
However, the annual Central Economic Work Conference wrapped up on Wednesday in Beijing, laid out an economic blueprint for 2012, pledging to maintain an economic stability.
"Stability means to maintain basically steady macro-economic policy, relatively fast economic growth, stable consumer prices and social stability," according to a statement issued by the conference.
China will preset or fine-tune monetary policy according to changes in economic development, employ multiple monetary policy tools and maintain a reasonable increase in money and credit supply.
Meanwhile, it will implement fiscal policy, such as further improving tax cut policies on selective sectors and enhancing input on sectors involving improving people's welfare.
Analysts said the blueprint, together with the Nov. 30 cut in the banks' reserve requirements, indicate a shift toward emphasizing support of growth rather than reining in inflation, which rose a lower-than-expected, 14-month low 4.2 percent in November.
The statement also described the current global economy as extremely grim and complicated as the eurozone sovereign debt crisis has worsened and economic recovery in the U.S. remains weak.
UPWARD OR REMAINING SAGGING?
Guo Shuqing, chairman of the China Securities Regulatory Commission, on Thursday suggested that China's 2-trillion-yuan pension fund and 200-million-yuan housing fund could be invested in the stock market.
This would vastly expand capital sources for the market, analysts said, adding that more liquidity will give investors reason to expect a better equity market performance next year.
"There is a signal of more loosening next year from the top. We see a rebound (in the stock market) next year after a two-year bear market," noted Wang Jianhui, chief economist with Southwest Securities Co Ltd.
Wang forecast that the benchmark Shanghai index could rise to 3,000 to 3,500 points in 2012. "I am bullish on Chinese stocks next year, but how much they will gain depends on how strong the government's easing efforts will be," he said.
According to China Daily, Dorris Chen, head of China research at BNP Paribas, stressed that Chinese stocks will have a weak first quarter but will rebound in the second and third quarters as the central bank loosens monetary policy.
She added that the Shanghai index might gain 20 to 25 percent next year and the H-share index of Chinese stocks listed in Hong Kong might rise to 12,600.
Huang Xuejun, an analyst with Guosen Securities Co Ltd, predicted a sustained rally starting as soon as after the Lunar New Year at the end of January.
However, individual investors are not as optimistic as the analysts. Some of them remain skeptical after a two-year bear market has dampened their confidence.
"Who knows if the market has reached bottom? During the last bear market, the index stood below 2,000 points," said Wang Wen, 46, who had more than 10 years of experience in the stock market.
"For me, I think another bull won't come in at least two years." Wang added.
UNPREDICATABLE WEATHER FOR PROPERTY SECTOR
Fitch Ratings Tuesday said in a report that China faces slower growth in home sales and construction next year as the Chinese government vowed to maintain property curbs next year.
On Dec. 9, the Political Bureau of the Communist Party of China Central Committee announced that China will maintain an unswerving stance on regulating the property market next year to ensure house prices return to a reasonable level, adding that more ordinary commercial residential housing will be built to increase effective supply.
Large developers, such as Vanke and Poly Real Estate Group Co, led declines in prices in the past week after the China Index Academy, a leading institute focusing on real-estate research, reported housing transactions plunged more than 50 percent in 13 cities out of 35 last week.
"The major worry for the economy comes from the property market," said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co.
"Investors are very wary of the impact of the curbs on economic growth next year. Investor confidence is very weak and stocks may fall further." Dai emphasized.