The combined total turnover of both bourses reached 310 billion yuan (HK$315.08 bn / US$40.38bn / RM137.3bn) yesterday. Despite the index rise slowing, new A-share account openings reached a record 4.78 million last month alone, surpassing the total number of new accounts opened for the whole of last year. The survey also revealed market capital locked in the A-share market amounted to 980 billion yuan as of end of last month, with both incoming and outflowing capital reaching record levels. Capital inflow per day has soared to 11.2 billion yuan (RM4.9bn), from 3.2 billion yuan (RM1.42bn) two months ago.
Standard Chartered chief economist Stephen Green said market capital is now worth more than 70 percent of China's gross domestic product. "This means there will be a major economic impact if there was a correction of 30 percent today, with the pain concentrated among small investors," Green said. He said the action taken will be more significant when the Shanghai Index moves toward 5,000, which he predicts can be reached in one month.
Naturally the bears have stated their case, but to be fair the bulls would have to have their say as well. Their main justification is absolute real earnings. If one looks at the valuation using the 2007 1Q results, one would see an entirely different picture. Out of the 1364 companies reported so far, the average earnings per share went up 78.1%. Big companies are carrying the flag waving with record profits being announced daily. Bao Steel last week reported a 154% earnings increase. China Life Insurance, CITIC Bank all reported record earnings. That's also why its easy to convince local Chinese investors to continue to pour funds into an overheated wok. This is also why it may not be so easy to kill the bull run, not when record new account openings are being registered each passing month. Willing sellers find even more new willing buyers, so much so the people who sold had to buy back again. Not a nice recipe, so enjoy while you can while the rest of the world watch Scary Movie 4, waiting for the shock (its coming, its a scary movie after all, it has to come.)