A rebound could happen in the Shanghai stock market, which reopens today after the Spring Festival holiday, while analysts expect fluctuations would continue in the Year of the Mouse.

 

They added the market is still in a technical correction, caused by a major slump late last month, although it had recovered 8.13 percent last Monday. The Shanghai Composite Index fell 1.55 percent to 4,599.7 last Tuesday, the last trading day before the market closed for the Spring Festival.

 

Earlier, the benchmark had posted the steepest weekly drop in more than a decade in the week ending February 1, amid concern the worst snowstorm in 50 years in the country would hurt economic growth and worsen inflation. The index was also influenced by a possible United States recession.

 

Valuations in the A-share market had also been reduced by the slump late January to a more reasonable level now, analysts added.

 

The index should gain today if history is any guide. The barometer had risen in 13 of the 17 first trading sessions after the Spring Festival since 1991.

 

United Securities, a brokerage, said the index could face resistance around 4,780 to 4,810 in short term, and if the level was breached, it could challenge within a range of 4,890 to 4,920. On the downside, the barometer could find its bottom between 4,330 and 4,360.

 

Last Monday's surge was a result of the government's intervention to support the market, with some media reports saying the government may adjust its three-month-old monetary tightening campaign.

 

Orient Securities recommended investors to include retailers, highway operators, utilities, property developers and banks into their stock portfolios for this month as these sectors may benefit from easing monetary policies and with regard to valuations.

 

(Shanghai Daily February 13, 2008)