As of April 11, the total market value of the Shanghai and Shenzhen stock exchanges exceeded 13 trillion yuan, nearly mirroring that of the Hong Kong exchange. By December last year, the figure for the Shanghai and Shenzhen exchanges was a mere 8 trillion yuan.

A CITIC Securities report recommended investing in big companies, as they contribute most to market profits.

While investors may be confident, economic experts are concerned, fearing that speculation will be devastating as amateurs jump into the stock market fray, creating substantial uncertainty in the market.

Money in the Bank

For the third time already this year, the Chinese central bank raised the reserve requirement ratio for the banking sector. The hike, taking effect April 16, brought the ratio up 0.5 percentage points to 10.5 percent and was seen as an effort to reel in excessive liquidity and curb the lending ability of banks.

Tao of Credit Suisse said that this recent reserve requirement intervention will exert little influence on the economy in the short term. Tao said the ratio would have to jump to 11-11.5 percent in order for Chinese monetary policy to dig its way out of the liquidity trap.

“The effect of raising the reserve requirement is relatively small compared with raising interest rates,” Tao suggested.

Tao predicted that the central bank will raise interest rates two more times this year by 54 basis points, and that the reserve requirement ratio will be lifted twice as well, up 100 basis points.

Striking It Rich

China Petroleum & Chemical Corp., widely known as Sinopec, posted the largest ever turnover--1.045 trillion yuan--among all listed companies in the yuan-denominated A-share market in Shanghai, said the company’s 2006 annual report.

Sinopec also enjoyed a net profit of 50.66 billion yuan, jumping 28.08 percent from its 2005 numbers. The company expected first quarter net profits under Chinese accounting standards.

Sinopec owns the largest gas station network in China, with 28,000 service stations across the country, leaving its major rival China National Petroleum Corp. (about 18,000 stations) in the dust.

The report also revealed that Sinopec is expected to process about 156 million tons of crude oil this year, up 6.6 percent from last year. Industry insiders assume that since there is little chance of an increase in upstream oil production in China, the 6.6-percent spike means that Sinopec will have to import an extra 10 million tons of crude.

Chairman of Sinopec Chen Tonghai believes the discovery of a significant natural gas field in southwest China’s Sichuan Province last year will further enhance the company’s future growth. n