Date
17 December 2017
By the end of the first quarter, the national team owned a total of 1,138 individual stocks worth up to 3.75 trillion yuan. Photo: gbtimes
By the end of the first quarter, the national team owned a total of 1,138 individual stocks worth up to 3.75 trillion yuan. Photo: gbtimes

Time for state funds to exit China equity market

State funds bought shares to prop up the mainland stock market during the stock market meltdown in 2015. However, the so-called national team has kept acquiring more shares to this day and their buying activities have been closely monitored as a trading cue.

As many mainland-listed companies announced their second-quarter results recently, some investors are paying more attention to their top 10 shareholder list than the underlying business results.

Punters believe state funds should have a unique insight into policy directions and whatever companies they choose to invest in should be good bets.

As such, companies with mediocre results can still draw a lot of buying interest if they reveal that state funds are among the top 10 shareholders.

By the end of the first quarter, the national team owned a total of 1,138 individual stocks worth up to 3.75 trillion yuan. It represents 6.44 percent of the total market capitalization, up 0.01 percentage point from the previous quarter.

In the second quarter, they added smaller firms and offloaded some blue chips.

For example, China Securities Finance Co. has reduced its holdings of stocks such as Yunnan Baiyao Group (000538.CN), Tianjin Port Co. (600717.CN), Kweichow Moutai Co. (600519.CN), Huaneng Power International Inc. (600011.CN) and Shanghai Jahwa United Co. (600315.CN).

Meanwhile, it has added shares of By-health Co. (300146.CN), Zhejiang Huace Film & TV Co. (300133.CN) and Beijing Kunlun Tech Co. (300418.CN), etc.

Two years after the crash, the national team should be exiting the market, but it remains active and in fact seems to become more speculative.

The presence of these state funds have somewhat inflated the valuation of stocks and deterred private investors from joining the market, as reflected in the lukewarm trading volume.

It’s time for the national team to retreat gradually to let market forces play a bigger role.

This article appeared in the Hong Kong Economic Journal on Aug. 25

Translation by Julie Zhu

[Chinese version 中文版]

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RT/RA

HKEJ columnist

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