Last Updated : GMT 11:55:52
Arab Today, arab today
Arab Today, arab today

Team China takes on country's rumour-driven markets

Arab Today, arab today

Arab Today, arab today Team China takes on country's rumour-driven markets

China stocks
Shanghai - AFP

Chinese authorities have deployed vast sums to try to stabilise slumping share prices, but have to contend with a rumour-driven market and investors like Wang Youfu, whose latest sure thing is a chemical firm that lost $180 million last year.

The retired hotel worker poured around $6,000 -- most of his savings -- into Lutianhua, whose main products include fertiliser, on hopes that whispers of a restructuring will turn his holding to gold.

He is not looking for solid fundamentals or good future prospects, and does not give a penny for whether a deal actually materialises or the firm recovers.

All he wants is to get out in time.

"The Chinese stock market is purely speculation," Wang said, trading on his smartphone from his home in a suburb of Shanghai, China's financial hub.

"I free the people in front of me," he went on. "The people behind free me. The last people left holding the stock are done for."

Wang's mindset is typical of the country's 90 million "mom and pop" small investors.

Regularly described as a "casino", the Chinese stock market is a gambling den in which the odds are stacked by the dealer -- the ruling Communist Party.

Authorities made it easier to borrow to trade shares, encouraged individuals to go into the markets, and Shanghai's benchmark index soared 150 percent in 12 months to mid-June.

Amid fears of a bubble, restrictions on margin trading were announced, and it collapsed 30 percent in three weeks -- prompting a government rescue package on a colossal scale.

- 'National team' -

The moves were slammed as interventionist and contrary to pledges of economic reform: barring major shareholders from selling, freezing trading in the shares of hundreds of companies, and funding a "national team" to buy for the government.

The squad includes the China Securities Finance Corp. (CSF), previously a virtually unknown financial institution set up by the country's two stock exchanges and the national clearing house in 2011 to help provide financing for trading.

CSF has bought nearly 400 stocks, according to state media, becoming the largest shareholder in a hydropower company and second largest in more than a dozen firms.

Veteran state-owned investment firm Central Huijin Investment, which already holds stakes in major state banks, is another player.

But despite the hundreds of billions of dollars the team is estimated to have spent, it has failed to beat market forces.

By Tuesday's close the Shanghai index was down 39 percent from its peak, and 10 percent off the level where the squad first stepped onto the market field. It fell again at Wednesday's opening.

Capital Economics Chief Asia Economist Mark Williams said government intervention was "badly conceived and poorly communicated" and the market was likely to remain weak.

"The flaws in the government's strategy to boost the market by purchasing equities became increasingly clear," he said in a research note. "Confidence in the market has been badly dented and we think the chances of sustained increases over the medium-term are low."

- Raising concerns -

The mishandling of the markets has raised concerns over the Communist Party's ability to handle the country's economy, whose slowing growth has sent global bourses into spasms of anxiety in recent weeks.

Instead the "national team" has become another object of traders' speculation, analysts say, trapping authorities in a dilemma of their own making by creating expectations they would boost the market.

When fears emerged the government was withdrawing from the market, the plunges resumed, and any sign of a pull-out is a reason for speculators to sell.

"This is the nature of intervention. People are buying only because they think you are going to buy," Fraser Howie, an independent analyst and co-author of "Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise", told AFP.

"Almost no other stock market has done it (intervention) successfully," he added.

Analysts say Chinese regulators should put more effort into building a class of institutional investors, instead of leaving the market in the hands of short-termists such as retiree Wang.

"The market was never driven by fundamental factors, it was a purely speculative market," Michael Pettis, a finance professor at Peking University, told AFP.

"There is still one strategy, and that is 'try to figure out if the government has enough ammunition to come in and with sheer brute force, force the market up',” he said.

"If you think the government can do that, then you should buy and if you don’t think the government can do that, then you've got to get out."

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today team china takes on countrys rumourdriven markets Arab Today, arab today team china takes on countrys rumourdriven markets


Arab Today, arab today
Arab Today, arab today Adidas Originals ‘reinterpreted’

GMT 14:52 2016 Thursday ,01 December

Adidas Originals ‘reinterpreted’
Arab Today, arab today At Milaidhoo Island, Maldives

GMT 08:42 2016 Wednesday ,07 December

At Milaidhoo Island, Maldives
Arab Today, arab today Paris's matchbox apartments

GMT 10:37 2016 Saturday ,24 September

Paris's matchbox apartments
Arab Today, arab today Status of main battle fronts

GMT 07:44 2016 Thursday ,08 December

Status of main battle fronts
Arab Today, arab today 'Rookie' Trump must fall into line

GMT 08:02 2016 Tuesday ,06 December

'Rookie' Trump must fall into line

GMT 23:19 2016 Wednesday ,07 December

US Stocks End High on Tuesday

GMT 21:42 2016 Wednesday ,07 December

Chinese Yuan Weakens to 6.8808 against USD Wednesday

GMT 18:07 2016 Wednesday ,07 December

Tadawul closes at 1-year high to a fresh one-year

GMT 15:57 2016 Wednesday ,07 December

Sterling hits 2-month high against dollar

GMT 09:57 2016 Wednesday ,07 December

US dollar rises against other major currencies

GMT 08:15 2016 Wednesday ,07 December

Foreign exchange rates in India

GMT 22:49 2016 Tuesday ,06 December

US Stocks Close Higher

GMT 22:33 2016 Tuesday ,06 December

Chinese Yuan Strengthens to 6.8575 Against USD Tuesday
View News in Arabic - Business: أسواق مالية
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today The summer school raising aspirations

GMT 12:49 2016 Tuesday ,06 December

The summer school raising aspirations
Arab Today, arab today Vanessa Redgrave makes directing

GMT 10:52 2016 Tuesday ,06 December

Vanessa Redgrave makes directing
Arab Today, arab today Indonesia expands protection

GMT 11:39 2016 Tuesday ,06 December

Indonesia expands protection
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today Hyundai allows Saudi journalists

GMT 15:14 2016 Thursday ,01 December

Hyundai allows Saudi journalists
Arab Today, arab today Latest Infiniti QX to compete

GMT 13:16 2016 Saturday ,26 November

Latest Infiniti QX to compete
Arab Today, arab today It's a squeeze, but Paris Impressionist

GMT 12:06 2016 Saturday ,03 December

It's a squeeze, but Paris Impressionist
Arab Today, arab today To battle Japanese whaling fleet

GMT 11:53 2016 Monday ,05 December

To battle Japanese whaling fleet

GMT 12:58 2016 Friday ,02 December

Trump, politics on the mind

GMT 13:00 2016 Monday ,05 December

Dubai Women Establishment delegation

GMT 04:15 2016 Thursday ,30 June

World's largest uncut diamond fails

GMT 13:01 2016 Thursday ,01 December

Green groups pressure Spain

GMT 15:59 2015 Wednesday ,27 May

Seoul elevates gardening to high art

GMT 12:39 2016 Saturday ,26 November

Skin patch could help kids

GMT 13:17 2016 Friday ,25 November

Ajman Tourism launches time capsule

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 09:53 2016 Sunday ,15 May

OMEGA official timekeepers
Arab Today, arab today
Arab Today, arab today
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube

Powered and Developed by FilmMatters

Copyright © 2016 Arabtoday

Developed by FilmMatters

© 2016 Arabtoday

arabtoday arabtoday arabtoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabtoday, Arabtoday, Arabtoday