The stock market next year: to 7,000

Shanghai stock market

Analysts are having their say about the Shanghai Stock Market, like here in the International Herald Tribune, and return to a more gloomy assessment, just like most of them did last year. The year 2007 has been, despite some severe drops, a stellar year for the stock market. There is nothing wrong with being cautious:

"It was a nice rally," UBS economist Jonathan Anderson wrote in a recent report. The market in 2008 "may not be nearly as exciting."

The basics for the fast growing stock market, be it perhaps on a lower level than 2007, are still in place. My local experts expect that the SSE index - now slightly over 5,000 - will pass the 7,000 benchmark by June, despite efforts by the central government to cool down the economy. Only opening up the international currency exchange could allow Chinese investors a way to invest their money elsewhere, and that move does not seem to be on the political agenda, since it obvious has also severe negative consequences.
Last week I have talked to people getting more capital from abroad to invest on the Chinese stock exchanges, signaling that the liquidity might only grow.
Also our own internal benchmark looks positive. We have a close family member who, when she started to invest at the Shanghai stock market, signaled a dive of the market for the next five years. Only after she withdrew from the market, the index went up again. To be sure I inquired last week: she has not intention to return to the market, so we are safe and can look forward to another stellar year.