Bearish outlook due to lack of stimulus

20/09/2011 00:00 AST

SHARES in Shanghai may remain bearish this week because of a lack of stimulus to boost investors' confidence at a time when domestic demand is sluggish and the global economic climate is dim.

The Shanghai Composite Index may move between 2,430 and 2,560 points this week, some analysts said over the weekend.

The index edged up 0.1 percent to close at 2,482.34 last Friday after five major central banks around the world agreed to offer US dollar-backed loans to prevent money markets freezing up because of debt crisis in the eurozone.

Although the rise trimmed the index's weekly decline to 0.6 percent, the gauge extended a loss into a third week.

Zhang Gang, an analyst at Southwest Securities, said: "The international efforts are laudable but they cannot reassure investors of the global economic outlook. Meanwhile, China's inflation is moderating less quickly than people had expected, indicating that tightening monetary measures will remain."

Zhu Min, vice managing director of the International Monetary Fund, said last week that China should continue its tightening policy to combat inflation.

He said price rises will be a long-term phenomenon in the country due to the inflow of global liquidity, rising commodity costs and more costly labor.

China's Consumer Price Index, the main gauge of inflation, rose 6.2 percent year on year last month. Although it eased from a 37-month high of 6.5 percent in July, it is higher than the market's previous forecast of below 6 percent.

Xu Haiyang, an analyst at Rising Securities, said another source of worry was the weakening economic growth momentum in China.

"Institutions cut their projections of China's economic outlook due to weakening confidence in the world's second-largest economy," Xu said.

Last week, the Asian Development Bank cut its estimate for China's economic growth this year to 9.3 percent from 9.6 percent.

Shanghai Daily