Different opinions on what Olympics mean for market

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Different opinions on what Olympics mean for market

With three days to go before the opening of the Beijing Olympics, local analysts yesterday gave a split forecast about the post-Olympic Chinese equity market.

The Chinese market, along with the U.S., is a major gauge for the movement of the local market.

Kwak Young-joon, an analyst at Tong Yang Investment and Securities, said in a report yesterday the Beijing Olympics will end the corrective mood in the Chinese market.

He said the Chinese government reduced profits of state-run companies specialized in finance or energy to curb inflation. Maintaining stable price levels was aimed at avoiding social instability that threatened the successful hosting of the international event, he said.

Beijing, Kwak said, specifically squeezed the liquidity to control energy prices, which in turn led to the big sell-off in the stock market.

“But, the Chinese government will take a different approach after the Olympics,” he predicted.

He said it is highly probable that the Chinese government will soon implement growth-driven policies including restructuring programs for state-run companies. Those new policies will stabilize state-run firms, he said.

“Beijing only accounts for 3.5 percent of the Chinese economy. The impact of the Olympics on the whole country will be small,” he said.

Cho Yong-chan, an analyst with Hanwha Securities, agreed that China is unlikely to experience the valley effect - an economic downturn - but said the Chinese stock market will still be trapped in a bearish mood until at least the end of this year.

“Business data of Chinese companies are continuing to worsen and the Olympics are not likely to change the trend,” Cho said.

Cho said it will still take some time for the investment sentiment in China to be revived.

By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
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