Bulls ready for long haul on Chinese bourses

Despite the divergent trend seen in the A-share market on Thursday, when it resumed trading after the seven-day Spring Festival holiday, a long-term bullish market can be expected in the Year of the Ox, said experts.

The benchmark Shanghai Composite Index, Shenzhen Component Index and ChiNext in Shenzhen all rose by 2 percent when the market opened for trading on Thursday. However, the performance varied when the market closed, with the Shanghai Component Index up by 0.55 percent to 3675.36 points and the Shenzhen Component Index down by 1.22 percent to 15767.44 points. The technology-focused ChiNext shed 2.74 percent to close at 3320.14 points.

Nonferrous metal companies were the biggest intraday gainers on the A-share market, rising by 5.91 percent. The other major gainers were coal, oil, textiles, software, steel and semiconductors.

Liquor companies dragged the market performance on Thursday. Beijing Shunxin Agriculture Co Ltd, known for its baijiu brand Niulanshan, fell by 9.4 percent, while Kweichow Moutai declined by 5 percent.

Analysts from Hexin Securities Investment Advisory said in a research note that institutions' changed their positions ahead of the upcoming two sessions. There was also a temporary tightening of liquidity due to the 260 billion yuan ($40 billion) capital outflow as a result of the central bank operations, as well as the drop in Kweichow Moutai share price. Investors should not worry about the short-term ups and downs but stick to their long-term strategy, said experts.

Though the A-share market witnessed a mutual fund boom last year, the growth momentum will continue this year as nearly 82 equity mutual fund products valued at over 450 billion yuan were issued in January, according to Zhou Haichen, general manager of the research institute of Shenwan Hongyuan Securities. Up to 31 mutual fund products are scheduled to be issued in February with a total value amounting to over 200 billion yuan. The mutual fund impetus will bolster the A-share market, he said.

Hu Youwen, general manager of the research center of Essence Securities, said the A-share market is in the preliminary stage of its long-term bullish performance. The logic behind this is China's economic restructuring and upgrade. Industry leaders have seen their return on equity improving. More Chinese household savings will continue to flow into the A-share market and global investors will also increase their weighting on A-share companies. All these trends form the beginning of a long-term change, he said.

"For the short to midterm, the A-share market, as well as the global market, will enter the post-epidemic period during which economies and companies' profitability will improve noticeably. Meanwhile, easing policies implemented during the epidemic will be phased out gradually. Some of the overvalued stocks will thus see price fluctuations," said Hu.

Huang Yanming, director of Guotai Junan Securities' research institute, pointed out that the prices and valuation of the blue-chip-focused CSI 100 and CSI 300 indexes are very much approaching the historic highs in 2015. Therefore, investors can look for more opportunities in companies which are not highly pursued by mutual funds. Companies from industries like nonferrous metals, machinery, pharmaceutical, hotels, electronics, new energy or defense may be good investment targets, he said.