A new report from US investment bank Goldman Sachs takes a confident stance about the long-term prospects of China's stock market.

 

Goldman Sachs updated an earlier prediction to claim that the H share index would hit 12,000 points at the end of 2007 and opined that Chinese stocks would resume their upward movement in the second half of this year.

 

China's economy is ticking over well and the fundamentals of Chinese companies are strong, economists from Goldman Sachs believe.

 

Further potential for RMB appreciation is also having a positive effect on business, the report said.

 

The recent market slump reflects the over-valuation of the A-share market and concerns about macro-control measures, said a company analyst.

 

Profit-taking and concerns about stock market risk are also factors in the market jitters, he said.

 

Goldman Sachs is still optimistic about the earnings prospects for H-shares and A-shares, adding that both markets are unlikely to drop more than 2.5 percent and 15 percent respectively.

 

On Feb. 27, Chinese stocks suffered their biggest single-day fall in a decade, plunging 8.8 percent, triggering a domino effect on global capital markets.

 

Hong Kong's blue chip Hang Seng Index fell 360 points, or 1.8 percent. The Dow Jones industrial index dived 416.02 points, or 3.29 percent, the Standard & Poor's 500 dropped 50.33 points, or 3.47 percent, and the Nasdaq composite index was down 96.65 points, or 3.86 percent.

 

(Xinhua News Agency March 8, 2007)