July 24, 2012
Translated by Tang Xiangyang

The benchmark Shanghai Composite Index dropped 1.26 percent to 2,141 points yesterday (Jul. 23) to its lowest closing point in three years, rebounding slightly from 2,135 points earlier in the day.

With a few exceptions like Huaneng Power International Inc. (華能國際), prices on most major banking, real estate, coal, ore and steel companies experienced a drop. The price of CITIC Securities（中信證券）shares dropped by 4.06 percent and China Merchants Bank （招商銀行）by 3 percent.

Predictions on the future of the market are mixed. Some observers foresee further decreases as IPOs absorb capital from the market amid grim American and European growth prospects, while others interpret the historic lows as leaving the market nowhere to go but up.

On Jan. 6 this year when A-shares fell to a low of 2,132 points, Li Daxiao （李大霄）, president of the British Securities Research Institute (英大證券研究所), labeled the number a “diamond floor” that couldn’t be broken. However, yesterday’s drop to 2,135 points - just three points higher than the “diamond floor” – brought renewed pessimism to observers predicting it will surely sink to or below 2,132 again.

Zhou Kai Kai （周愷鍇）, researcher at Soochow Securities （東吳證券）predicted A-shares might fall to 2,132 this week amid a medium-term readjustment. He said that although the central bank lowered interest rates and the required reserve ratio twice this year, the measures were intended to promote the larger economy rather than to stimulate the stock market. Many international companies have been bullish on the Chinese market and have vowed to buy more A-shares, he says, but their injected capital won’t do much in the short-term. Zhou attributed the sluggish market to the decreased number of new investors, the flight of old investors, continuous IPOs and the expiration of time-limits on holding certain shares.

However, Qi Dapeng （祁大棚）, an analyst with the Xiangcai Securities (湘財證券), and “The Stock Market Situation” (股市風云), a popular Sina blogger, view the situation more optimistically. They see the market as more or less bottomed out and primed for investment. The latter even said there could be a trade volume of over one hundred billion yuan this week.

Links and Sources
Nanfang Daily: 滬指創三年收盤新低 多頭靜待“反戈一擊