Analysts take cautious view on stocks as rally stumbles

Analysts maintained a cautious view about the prospects for stocks after mainland markets lost ground last week.

The Shanghai Composite Index slipped 0.86 percent on Friday to close at 3,012.82 points, extending the week’s loss to 1.36 percent.

The Shenzhen Component Index shed 0.72 percent on Friday to close at 10,709.07 points, logging a 1.05 percent loss for the week.

The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen dipped 0.84 percent to close at 3,225.16 points on Friday, down 1.56 percent for the week.

The ChiNext Index, which tracks the country’s NASDAQ- style board for growth enterprises, lost 0.67 percent on Friday to finish at 2,250 points – a 0.61 percent loss for the week.

The mainland stock markets recent incremental rally stumbled last week.

The benchmark stock index declined on most of the trading days, though the Shenzhen Component Index was more balanced.

Analysts noted that the primary driving force for the recent rally has been market expectations for looser monetary policy as a result of the UK’s decision to leave the EU, but those expectations have been kept on tenterhooks because there have not been any clear signs of looser monetary policy thus far.

“Because many events are still unresolved, it remains possible that the domestic economy might slump and the government won’t roll out any money easing policies, causing the markets to edge down,” said Li Lifeng, an analyst from Sinolink Securities.

On the whole, Li noted that he re- mains cautious about the long- term prospects of domestic shares.

Other analysts have noted that there have been no clear investment highlights on the two exchanges recently, and that might suppress the interest of domestic investors.

Trading remained stable but still at a low level. According to the latest data from the Shanghai and Shenzhen stock exchanges, the total circulating market value of the two bourses was 37.38 trillion yuan ($ 5.60 trillion) as of Friday, slightly down from the 37.75 trillion yuan the previous week.

The scale of margin trading amounted to 886.2 billion yuan as of Thursday, 11.1 billion yuan higher than at the end of the previous week.