China's stock market topped $1 trillion for the first time and the yuan rose past the Hong Kong dollar, reflecting an economy that's grown 10-fold since Deng Xiaoping opened the Communist nation to international investment in 1978. | |
| The value of shares on the Shanghai and Shenzhen stock exchanges more than tripled in the past year and reached $1.01 trillion as of yesterday's close, according to data compiled by Bloomberg. The yuan climbed to more than 1 per Hong Kong dollar today for the first time in 13 years. |
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| The gains reflect economic growth averaging 9.6 per cent in the past five years, driven by record trade surpluses that pushed China's foreign-exchange reserves to $1 trillion. That's prompted the US and European pressure for a more flexible yuan and made China's stocks the most expensive relative to earnings in Asia. |
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| "China is emerging as an economic powerhouse and the status of the stock market will be more prominent,'' said Li Huiyong, an economist at Shenyin & Wanguo Securities Co in Shanghai. "By our estimation, China's economy will overtake Germany as the world's third-largest in 2010.'' |
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| China's economy grew 10.7 per cent in the first nine months of last year after overtaking the UK and France in 2005 to become the world's fourth largest. The government is scheduled to announce 2006 growth figures on January 25. |
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| China's benchmark stock indexes have surged since July 2005 after plunging by more than half in the four preceding years. The rally came after the government implemented a plan to make more than $200 billion of mostly state-owned stock tradable, the biggest ownership shakeup in the market's 16-year history. |
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| The Shanghai and Shenzhen 300 Index is trading at 34 times earnings, compared with 16 times for Australia's S&P/ASX 200 Index and 14 times for Hong Kong's Hang Seng Index. The 300 Index fell 1.1 per cent today, paring its 12-month gain to 129 per cent. |
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| "Excessive liquidity has pushed the market to a level that's unsustainable in terms of fundamentals,'' said Chen Shide, who manages the equivalent of $212 million at GF Fund Management Co in Guangzhou, southern China. |
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| "You'd better stay away and sit tight for the moment as most stocks are expensive.'' Shares of Industrial & Commercial Bank of China have jumped 77 per cent in Shanghai since the company's world-record IPO in October. The surge pushed ICBC ahead of HSBC Holdings Plc as the third-biggest bank globally with a market value of $226 billion. |
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| China Life Insurance became the world's second-most valuable insurer after its yuan shares more than doubled on their first day of trading this week.China now ranks as the third-biggest stock market in Asia by value, after Japan on $4.8 trillion and Hong Kong's $2.1 trillion. |
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| The US market, valued at $17.4 trillion, is the world's biggest."China's market value will be able to soon catch up with Japan, if the government keeps up the fast pace of new share sales,'' said Lin Tongtong, who manages about $182 million at HSBC Jintrust Fund Management Co in Shanghai. |
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| The yuan rose to 1.0004 per Hong Kong dollar and 7.7949 to the US currency at 5:30 pm in Shanghai, the biggest gain since November 29, according to Bloomberg data. |
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| The currency has advanced 6.2 per cent since China ended a decade-old link to the dollar in July 2005. The US and European governments say the yuan is still undervalued and are pressing China to relax controls to ease trade imbalances. |
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| China's trade surplus swelled 74 per cent to a record $177.5 billion last year as exports surged, the government said today. |
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| "This reinforces the story that China's still got huge surpluses and needs to deal with them,'' said Thio Chin Loo, senior currency strategist at BNP Paribas SA in Singapore. "The pressure for more gains isn't going to go away.'' |
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| Gains in the yuan may add to pressure on Hong Kong to adjust a 23-year-old currency peg to the dollar to reflect growing economic ties with China. The Hong Kong Monetary Authority says any change would rock investor confidence and has spent the past three years stopping currency appreciation. |
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| "Breaking 7.80 is psychologically impressive, but it's just a passing point or a passing ceremony,'' said C H Kwan, a Tokyo-based senior fellow at Nomura Institute of Capital Markets Research, a unit of Japan's biggest brokerage. "The Hong Kong dollar is likely to remain pegged to the US dollar at a central rate of 7.80 in coming years, even as the yuan heads higher.'' |
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| Hong Kong's de-facto central bank prevents its currency from trading more than 5 cents either side of 7.80 per US dollar. |
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