Rule-based mar­ket can end the up-and-down cycle in stock mar­ket

China Daily (Hong Kong) - - VIEWS -

De­spite fre­quent cor­rec­tions, China’s stock mar­ket in­dexes have un­ex­pect­edly kept mov­ing up in re­cent months. The bench­mark Shang­hai Com­pos­ite In­dex rose to 3,301 points in late Novem­ber from as low as 2,638 points early this year.

Look­ing for­ward, the do­mes­tic stock mar­ket may be­come more tur­bu­lent in 2017 given the many un­cer­tain­ties posed by changes in both the do­mes­tic and in­ter­na­tional eco­nomic and fi­nan­cial land­scapes.

The In­ter­na­tional Mon­e­tary Fund’s lat­est re­port says the world econ­omy may grow by 3.4 per­cent in 2017, up from 3.1 per­cent this year. Even if the forecast proves right, which is not of­ten the case, the world econ­omy will con­tinue to strug­gle to come out of the low-rate growth cycle it has been trapped in for long.

Do­mes­ti­cally, some an­a­lysts have pre­dicted that China’s an­nual year-on-year GDP growth could fall to be­low 6.5 per­cent next year. Although pol­i­cy­mak­ers re­main con­fi­dent of keep­ing growth at a sta­ble level, it will be more chal­leng­ing for the coun­try to use fis­cal and mon­e­tary tools to keep the econ­omy rolling.

The stock mar­ket trend may not closely fol­low the changes in eco­nomic fun­da­men­tals, but given the weak, low-rate growth prospects, the pos­si­bil­ity is not high that the stock in­dexes will in­crease im­pres­sively. Worse, the global fi­nan­cial mar­kets seem to have be­come more tur­bu­lent thanks to the fre­quent oc­cur­rence of “black swan” in­ci­dents.

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