By Fei Ya (China Daily)
Updated: 2007-08-22 09:41

The A-share market yesterday rose to nearly 5,000 points, reflecting the general climate of optimism in the bourse.

The Shanghai Composite Index closed at 4955.207, a 1.79 percent rise after soaring 5.33 percent on Monday. The market hit a record intra-day high of 4,982.981, triggering investor speculation of an imminent crossing of the 5,000 mark.

Rising Shanghai shares outnumbered losers 471 to 384, while turnover in Shanghai A shares rose to a weekly high of 154.8 billion yuan.

The market's encouraging performance diminished investors' concerns that the subprime credit crisis might lead to a new round of market correction.

"The global subprime crisis will have limited impact on the A-share market as the mainland still regulates capital inflow and outflow in the investment arena," said Sun Daqing, an analyst with China Investment.

In Sun's view, the impact of the subprime credit crisis will be indirect. "Some A-share companies, especially banks, may lose money by directly or indirectly investing in overseas subprime products, but that loss will be very limited."

For the real estate sector, the analyst did not see a similar credit crisis in domestic mortgage loans. Sun pointed out that unlike the United States' property market, Chinese banks have to abide by far stricter requirements in lending money to homebuyers.

As China's real estate prices continue on upward trend, Sun forecast a positive outlook for the domestic sector.

From the global perspective, Sun said he believes the crisis will stay confined within the capital market rather than spreading to the entire economy. "I don't think the US economy will be damaged by the subprime crisis, and the Fed still has enough measures at its disposal to protect the economy from a recession."

"The potential impact of the subprime crisis on China is likely to be non-linear," said Wang Qing, chief economist of Morgan Stanley Greater China.

Wang pointed out that in a benign scenario, the crisis would remain a market event instead of an economic one, China's economic growth would remain robust and the country would experience more capital inflows.

"In an adverse scenario, if the US economy were to be knocked into a serious recession, China's economy would be negatively affected by the resultant slower exports. In that case, China's growth would slow, disinflation or deflation would emerge and asset markets would tumble," Wang said.