China Dances To Own Tune

China is either beginning to stand on its own two feet or investors are blind to the risks of investing after last week’s global share sell off was not reflected in the China market.

In fact yesterday the Shanghai Composite Index, the primary share index for the country, built on gains made last week to close 95.41 points up at an all time high 4,440.77 last night.

The other major bourse on the mainland, the Shenzhen Component Index also followed suite by closing up more than 3 per cent higher and beating the previous index record set the previous Thursday.

The upbeat mood of investors was on the back of strong half annual corporate earnings and for the Shanghai Composite, which which covers both A- and B-shares listed on the Shanghai Stock Exchange, resulted in 1,133 of stocks covered closing higher, with 138 remaining unmoved, while only 188 declined over the day.

With many commentators sitting in one of two camps – China needs the US, China doesn’t need to US – analysts would have to delve into the full derivation of the corporate profits being generated inside China to ascertain which camp is correct.

Meanwhile as the China market reacted in a limited way to the global sell off reaction to the bad news emerging from the US sub-prime mortgage market, Chinese investors it seems are waiting until this impacts, if at all, on the bottom line of corporate earnings.

In the meantime the bullish sentiment lives on inside China, despite the latest worrying inflation data (set to rise to 4.5%) and a clear indication the central bank will raise interest rates in a bid to reign in the bulls.

People power it seems is ruling when it comes to investing in China, with the Government wary of dousing the investment fever engulfing the country.

All efforts so far, even minor interventions, have been received with worrying knee-jerk reactions from investors leaving the Government, which understands the critical need for a buoyant share market, for once powerless almost in being able to apply the brakes without derailing the steam train in the process.