Chinese stocks may rise next week when markets reopen after a 10-day closure, some investors say, as pent-up demand and signs that a state pension fund is poised to buy stocks outweigh concerns about severe acute respiratory syndrome (SARS).
"The welfare fund is likely to invest in index heavyweights such as Sinopec, and this will give the index a boost," said Ma Jun, who helps manage the equivalent of US$100 million at E Fund Management Co in Guangzhou.
Sinopec, or China Petroleum & Chemical Corp., is Asia's largest oil refiner and the biggest stock in Shanghai's A-share index, with a 9.2 percent weighting.
China is sticking to its plan to resume trading in Shanghai and Shenzhen on May 12 even though its SARS epidemic has grown by two-fifths since the end of April, when regulators extended a May holiday by a week to prevent large gatherings. The Shanghai A-share index, which tracks stocks restricted to local investors, fell 6.7 percent in the two weeks before the closure.
Stocks may be buoyed by this week's appointment of former finance minister Xiang Huaicheng to head a state pension fund, completing a revamp that will allow the agency to invest some of its 124 billion yuan (US$15 billion) of assets in stocks.
"This news is a much-needed shot in the arm for investors, who have been bombarded by nothing but bad news about SARS," said Ma, who runs E Fund Management's Keshun Fund.
A China Securities Regulatory Commission spokeswoman said the regulator is standing by its decision to reopen markets on May 12.
The continued spread of SARS had led some investors and analysts to speculate the closure would be extended by at least a week.
China has 4,698 victims of SARS, up from 3,303 when the extended closure was announced. Of the victims, 224 have died. The country's outbreak accounts for two-thirds of the global total of about 7,000 infections, which have led to about 500 deaths.
Some analysts disagree that investors will resume trading in an optimistic mood.
"The SARS issue is likely to overshadow everything else and damp investors' sentiment," said Yao Maogong, deputy head of trading at Shanghai Securities Co, the brokerage arm of Shanghai International Trust & Investment Corp.
Still, he sees no alternative to reopening the exchanges.
"Trading has to resume -- the markets surely can't remain closed until they find a cure. Who knows how long that will be?" There are almost 69 million stock investors and traders in China's US$500 billion equities market, more than the total population of the UK. Stock trading is popular in a country that has US$1.1 trillion in household savings and a dearth of investment choices.
All the same, anxieties about SARS may weigh on trading, especially as Shanghai is starting to report more cases, after remaining almost unscathed until this month. The city of 17 million reported its first death Thursday.
"Investors are likely to adopt a wait-and-see attitude to see if SARS in Shanghai is going to surge like it did in Beijing," said Chen Zhe, an analyst at Citic Securities Co. "Any gain next week is a knee-jerk reaction and can't be sustained."