Can hopes rise for the hopeless in the equity market?

(CHINADAILY)Lastweek'sstock marketvolatility,attendantautomatictriggeringofthenewcircuitbreakersandtheirsubsequentsuspensionareexpectedtoresultinfreshmeasuresbytheauthoritiesconcernedthisweek,analystssaid.

Theyexpectfurthermonetaryeasingandmeasurestostabilizetheforeignexchangemarket,which,theysaid,wouldhelpinvestorstoovercomeanxiety.

AuthoritiessurprisedlateThursdaybysuspendingthenewcircuit-breakermechanismjustfourdaysafteritslaunch,afterkeyindicesplunged7percentonsuccessivedays.

ByFriday'sclose,itwasclearthebenchmarkShanghaiCompositeIndexdeclinedasmuchas10percentinthefirstweekofthenewyear.

Themarketselloffthatbeganearlylastweek,haditsrootsintheexpectationthatlargeshareholdersinindex-linkedcompanieswilllikelyresumesellingassoonasthesix-monthbanonsuchsalesendedonFriday.

Ironically,thenewcircuitbreakers,whichlimitedtheextentofmarketmovementto7percentinthehopeoftacklingvolatility,notonlyexacerbatedtheselloffbutaggravatedtheliquiditycrunch,analystssaid.Theyunderscoredcriticisminmediathatcircuitbreakersinadvancedmarketsgettriggeredonlyifthemovementissteeptotheextentof15to20percent.

TheyfurthersaidthatinvestorsintheA-sharemarket,inthehopeoffindingconsolation,couldconsidertakingastepbackovertheweekendtofocusonthisyear'spossiblebroadertrend.

WendyLiu,chiefChinastrategistatNomuraSecurities,saidthatthepaceofUSFederalReserve'sratehikesandChina'screditcyclewouldbetwomajordriversofthemarketthisyear.

Reliefmightcome,butnotuntilaroundMarch,ifsignsbrightenbythenthatNomura'sforecastoftwoFedratehikesinJuneandDecemberwilllikelycometopass,Liusaidinaresearchnote.TheconsensusforecastisforfourFedratehikesthisyear.

"InChina,itscreditcyclewillfurtherunfold,asakeypartofthesupply-sidereforms,whichwilllikelyleadtorisingbanknon-performingloans,variouscreditdefaultsandclosureof'zombie'companies,includingsomeState-ownedenterprises,"Liusaid."Whilethismayraiseriskaversion,itistheveryreformthatthemarkethasbeenwaitingfor."

Severalanalystsfeelpromptgovernmentactionontheforeignexchangefrontcouldhelpanchorinvestoranticipationforthevalueoftherenminbi.

Lastweek,theChinesecurrencyweakenedsubstantiallytoreachthelowestlevelsince2011,intensifyingfearsofcapitalflightfromChina.Itisfearedanysuchoutflowswouldfurtherdestabilizethefragilestockmarket.