China avoids asset bubble
Despite fears of an asset price bubble, the China A share market ended the September quarter down 12.5 per cent following a steep climb earlier in the year.
The drop in share prices is a “healthy correction”, according to AMP Capital Investors’ quarterly report, following a period of investor fear that asset price inflation would lead to a bubble.
“The China A share market climbed sharply in the first seven months of the year, however, in August concerns began to arise that perhaps overheating was now a more pressing issue,” the report said.
AMP noted the contribution of the Chinese Government’s 2008 fiscal stimulus package, which improved the local economy and helped “to cushion China” against the downturn.
The quarter also saw “a steady increase” in initial public offerings (IPOs) activity on the share market, and AMP further noted strong retail sales growth, which is “continuing at historically high levels, buoyed by very strong real-income growth, mild deflation and the increasing urbanisation of the population”.
AMP noted “strong recovery” in the investment property market but expressed concern that progress would be slowed down due to tight measures from the Government.
AMP said the Chinese share market “remains attractive on a long-term basis”.
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