BEIJING, Feb. 10 -- China's stocks may rebound after this month's Lunar New Year holiday because the government won't tighten monetary policy too aggressively given the outlook for economic growth, according to the nation's top-ranked brokerages.
"Expectations of continued government tightening will ease as growth may be weaker than market forecasts," Yu Jun, an analyst at CITIC Securities Co, the largest Chinese brokerage, said in a report. Investors should buy Chinese shares as the government may lend support to some industries such as the property market after economic growth slows in the second quarter, wrote rival Shenyin Wanguo Securities Co analysts Chen Jie and Yuan Yi.
After rallying 80 percent last year, the Shanghai Composite Index has declined 11 percent in 2010 on government measures to control loan growth and prevent asset bubbles.
The benchmark index fell 4.23, or 0.1 percent, to 2,935.17 at the close after swinging between gains and losses more than 10 times.
China started tightening monetary policy last month, when the banking regulator unexpectedly raised the proportion of deposits lenders have to set aside as reserves to check credit growth that helped send property prices higher in December by the most in 18 months. Asset bubbles are the "real worry" for China's economy as growth accelerates, central bank advisor Fan Gang said on Feb 1.
The nation will release January data on housing prices, inflation, trade, money supply and bank loans this week. Consumer prices will rise 2.1 percent in January, and producer prices gain 3.5 percent, according to economists surveyed by Bloomberg. Exports will expand 29.5 percent last month from a year earlier, the survey showed.
China has to be careful not to excessively tighten its monetary policy as exports may remain "quite weak for some time", Aberdeen Asset Management Plc's Nicholas Yeo said in a Bloomberg Television interview yesterday.
China's Lunar New Year begins on Feb 13 and lasts until Feb 21.
Shenyin Wanguo and CITIC Securities are ranked as the first and third "most influential" brokerages by New Fortune magazine.