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Thursday 25 September 2008
Huijin Functioning as A-Share Market Stabilization Fund
Some market watchers think that although China has not officially established a stabilization fund for the stock market, Huijin is actually playing the role unofficially.
Huijin Functioning as A-Share Market Stabilization Fund
Central Huijin, a wholly-owned subsidiary of China’s sovereign wealth fund, China Investment Corporation, has confirmed through the Shanghai Stock Exchange that it has bought two million A-shares each of Industrial and Commercial Bank of China (ICBC), Bank of China, and China Construction Bank (CCB), and will continue to increase its holding of these banks’ shares over the next 12 months.
Huijin spent only 25.38 million yuan on the deal, but its first intervention in the market had quite an effect. From last Thursday, when the news of Huijin’s plan for intervention was released, through yesterday, the market value of the three banks’ shares shot up by 734 billion yuan.
Some market watchers think that although China has not officially established a stabilization fund for the stock market, Huijin is actually playing the role unofficially.
Huijin declared its intention to buy shares of the three banks on the open market last Thursday, and started relevant market operations the same day, but didn’t close the deal until Friday, when the stamp tax change went into effect. The news plus that of the State-owned Asset Supervision and Administration Commission of the State Council encouraging central enterprises to buy back their own shares boosted the stock market up to that day’s limit. Shares of ICBC, CCB, and the Bank of China, which had been slumping, rose nicely.
As Huijin didn’t push a lot of money into the market, its influence has been more psychological than real. To what degree Huijin will further increase its holdings in the three banks, and the performance of their shares, will be a factor in how far this rebound can go.
The turnover of ICBC shares totaled 4.85 billion yuan this Wednesday, of which only a bit over 8 million yuan went to Huijin. Investors were obviously encouraged by Huijin and its purchase may stimulate the stock market for a while, but it can’t support share prices for long and may even cause more losses.
Some critics have deemed Huijin’s intervention to be “insider trading” since it happened as the government announced the reduction of the stamp tax, and was therefore unfair to common investors. And if Huijin doesn’t plan long-term investment, they say, it may be manipulating the share prices.
Analysts call the A-share market very weak now, and the index will likely drop through the 2000 point barrier again soon. Judgment on any new market value may form in October when listed companies’ third quarter reports are released.
Before increasing its holding, Huijin owned 118.006 billion ICBC shares, 35.3292% of ICBC’s total. Now Huijin holds 118.008 billion ICBC shares, or 35.3298%.
Huijin before directly and indirectly owned 158.842 billion of CCB’s H-shares, accounting for 65.4041% of CCB’s total. Adding 2 million of CCB’s A-shares means Huijin now holds 65.405% of CCB’s combined total.
Huijin’s 2 million share purchase in the Bank of China pushes its original stake of 171.325 billion shares, accounting for about 67.4937% of the total, up to 171.327 billion, and its percentage of the total up to 67.4945%.
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Huijin Functioning as A-Share Market Stabilization Fund
Central Huijin, a wholly-owned subsidiary of China’s sovereign wealth fund, China Investment Corporation, has confirmed through the Shanghai Stock Exchange that it has bought two million A-shares each of Industrial and Commercial Bank of China (ICBC), Bank of China, and China Construction Bank (CCB), and will continue to increase its holding of these banks’ shares over the next 12 months.
Huijin spent only 25.38 million yuan on the deal, but its first intervention in the market had quite an effect. From last Thursday, when the news of Huijin’s plan for intervention was released, through yesterday, the market value of the three banks’ shares shot up by 734 billion yuan.
Some market watchers think that although China has not officially established a stabilization fund for the stock market, Huijin is actually playing the role unofficially.
Huijin declared its intention to buy shares of the three banks on the open market last Thursday, and started relevant market operations the same day, but didn’t close the deal until Friday, when the stamp tax change went into effect. The news plus that of the State-owned Asset Supervision and Administration Commission of the State Council encouraging central enterprises to buy back their own shares boosted the stock market up to that day’s limit. Shares of ICBC, CCB, and the Bank of China, which had been slumping, rose nicely.
As Huijin didn’t push a lot of money into the market, its influence has been more psychological than real. To what degree Huijin will further increase its holdings in the three banks, and the performance of their shares, will be a factor in how far this rebound can go.
The turnover of ICBC shares totaled 4.85 billion yuan this Wednesday, of which only a bit over 8 million yuan went to Huijin. Investors were obviously encouraged by Huijin and its purchase may stimulate the stock market for a while, but it can’t support share prices for long and may even cause more losses.
Some critics have deemed Huijin’s intervention to be “insider trading” since it happened as the government announced the reduction of the stamp tax, and was therefore unfair to common investors. And if Huijin doesn’t plan long-term investment, they say, it may be manipulating the share prices.
Analysts call the A-share market very weak now, and the index will likely drop through the 2000 point barrier again soon. Judgment on any new market value may form in October when listed companies’ third quarter reports are released.
Before increasing its holding, Huijin owned 118.006 billion ICBC shares, 35.3292% of ICBC’s total. Now Huijin holds 118.008 billion ICBC shares, or 35.3298%.
Huijin before directly and indirectly owned 158.842 billion of CCB’s H-shares, accounting for 65.4041% of CCB’s total. Adding 2 million of CCB’s A-shares means Huijin now holds 65.405% of CCB’s combined total.
Huijin’s 2 million share purchase in the Bank of China pushes its original stake of 171.325 billion shares, accounting for about 67.4937% of the total, up to 171.327 billion, and its percentage of the total up to 67.4945%.
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