Stock losses? Investors point blame
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Shanghai Daily, January 4, 2012
Insider dealing
And then there is the old chestnut of insider trading. Those working in the markets have access to valuable information denied the public at large. Last week, the securities regulator and the police announced that a seven-year crackdown on insider trading had netted 50 cases involving 4.5 billion yuan.
Last year, Li Qihong, a mayor in the southern city of Zhongshan, was sentenced to death for taking bribes and making more than 19 million yuan by trading shares in Zhongshan Public Utilities Group. She was in charge of restructuring and listing of the company. Three other officials from companies and governments have been jailed or sentenced to death with a reprieve for making a total of 115 million yuan by taking advantage of insider information. It is hard to imagine how many equally guilt traders have gone undetected.
Market prophet
Another big winner in declining markets has been the government's social security fund, with nearly 900 billion yuan under management. The law allows 30 percent of the fund to be invested in the stock market. Official data show that the fund has made average annual profits of 9.75 percent from 2000 to 2010.
Market watchers have pointed out, tongues in cheek, how the fund's managers always seem to show perfect timing in their trading decisions.
"During the boom of stock market in 2007, profits of the social security fund surged 43 percent," said Ye Tan, an independent economic commentator. "The fund has been receiving special treatment, with grants of state-owned shares and accurate timing of buying and selling." She noted that 31.9 billion yuan of state-owned shares were transferred to the fund in 2010.
"If the fund were just an ordinary investor, without the benefit of preferential policies, its fate in the stock market would be worrisome," Ye said. "But if the fund continues to be a 'prophet' of the market, the tears of ordinary investors won't dry up."
The regulator has acknowledged problems in the markets and pledged to tighten its supervisory controls. Still, China's IPOs show no signs of slowing. An estimated 300 billion yuan of new shares is expected to come to market in 2012, according to Wang Yang, a partner with Ernst & Young.
The regulator is also talking about allowing 20 percent of the government's 2 trillion yuan pension fund to invest in stock markets, arousing fears that the "charmed" track record of the social security fund will be repeated, to the detriment of small shareholders. Individual investors who hold on to their shares and swallow losses can only hope that the situation will brighten in 2012.
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