Daniel Ren in Shanghai and Adam Chen in Beijing 3 December 2008
The national pension fund spent an additional 10 billion yuan (HK$11.3 billion) buying A shares last month, lending support to a stock market battered by poor company earnings, sources said.
The National Social Security Fund’s investment was in line with chairman Dai Xianglong’s earlier remarks that the fund wanted to help bolster investor confidence.
The pension fund, which had 516.2 billion yuan of assets at the end of last year, bought the shares at a time when most analysts predicted the market was set to tumble further in the face of the woeful performance by companies in the fourth quarter.
A source close to the NSSF said the fund splashed out on stocks because it believed the market had bottomed out.
A spokesman for the pension fund declined to comment yesterday.
The central government, hoping to shrug off the gloomy sentiment in the market, is encouraging the NSSF and Central Huijin, an investment arm of the country’s US$200 billion sovereign wealth fund, to buy shares at the current low prices.
The Shanghai Composite Index has slumped 64.09 per cent this year, closing at 1,889.638 points yesterday.
Some brokerages have forecast a further drop of 20 per cent in the coming months, as 80 per cent of the mainland’s 1,600-plus listed companies are expected to either report a profit decline or post losses for the year.
“The pension fund has a good track record of equity investment and this is the latest step Beijing is taking to shore up confidence,” said West China Securities trader Wei Wei.
“But investors may not want to follow in its footsteps this time.”
Some analysts said 10 billion yuan was insufficient to bail out the moribund market, since daily turnover on the mainland stock exchanges was valued at about 100 billion yuan recently.
The State Information Centre suggested in a report published in the China Securities Journal yesterday that the mainland should set up a stabilisation fund to rescue the strategically important stock market.
That suggestion echoed a proposal by the Chinese Academy of Social Sciences that called for 800 billion yuan to be put into the fund.
The NSSF started dumping shares at the end of last year when the market retreated from the all-time high set in mid-October.
The fund has recorded handsome gains from the stock market since it started to buy A shares in 2003, with an average annual return of 26 per cent.
However, Mr. Dai said in July that the NSSF would suffer big losses on its stock investments this year, falling victim to the bearish mood.
But he added that the NSSF would not dump stocks aggressively.
According to third-quarter earnings reports from public companies, the NSSF was invested in 145 firms as of September 30, up from 108 at the end of the second quarter. Mr. Dai said last week the NSSF believed the long-term outlook for A shares was bullish and the fund was seeking stable returns by additional purchases now that valuations were low.
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Pension Fund Spends 10b Yuan on A-Shares
Move aimed at shoring up investor confidence
Daniel Ren in Shanghai and Adam Chen in Beijing
3 December 2008
The national pension fund spent an additional 10 billion yuan (HK$11.3 billion) buying A shares last month, lending support to a stock market battered by poor company earnings, sources said.
The National Social Security Fund’s investment was in line with chairman Dai Xianglong’s earlier remarks that the fund wanted to help bolster investor confidence.
The pension fund, which had 516.2 billion yuan of assets at the end of last year, bought the shares at a time when most analysts predicted the market was set to tumble further in the face of the woeful performance by companies in the fourth quarter.
A source close to the NSSF said the fund splashed out on stocks because it believed the market had bottomed out.
A spokesman for the pension fund declined to comment yesterday.
The central government, hoping to shrug off the gloomy sentiment in the market, is encouraging the NSSF and Central Huijin, an investment arm of the country’s US$200 billion sovereign wealth fund, to buy shares at the current low prices.
The Shanghai Composite Index has slumped 64.09 per cent this year, closing at 1,889.638 points yesterday.
Some brokerages have forecast a further drop of 20 per cent in the coming months, as 80 per cent of the mainland’s 1,600-plus listed companies are expected to either report a profit decline or post losses for the year.
“The pension fund has a good track record of equity investment and this is the latest step Beijing is taking to shore up confidence,” said West China Securities trader Wei Wei.
“But investors may not want to follow in its footsteps this time.”
Some analysts said 10 billion yuan was insufficient to bail out the moribund market, since daily turnover on the mainland stock exchanges was valued at about 100 billion yuan recently.
The State Information Centre suggested in a report published in the China Securities Journal yesterday that the mainland should set up a stabilisation fund to rescue the strategically important stock market.
That suggestion echoed a proposal by the Chinese Academy of Social Sciences that called for 800 billion yuan to be put into the fund.
The NSSF started dumping shares at the end of last year when the market retreated from the all-time high set in mid-October.
The fund has recorded handsome gains from the stock market since it started to buy A shares in 2003, with an average annual return of 26 per cent.
However, Mr. Dai said in July that the NSSF would suffer big losses on its stock investments this year, falling victim to the bearish mood.
But he added that the NSSF would not dump stocks aggressively.
According to third-quarter earnings reports from public companies, the NSSF was invested in 145 firms as of September 30, up from 108 at the end of the second quarter. Mr. Dai said last week the NSSF believed the long-term outlook for A shares was bullish and the fund was seeking stable returns by additional purchases now that valuations were low.
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