Stocks finish mixed amid higher volatility
Updated: 2007-08-08 16:45
Analysts attributed the recent resurgence in the stock market to a series of expected affirmative policies, which may introduce sufficient "sunny" capital into the market. Such moves include the expansion of the investment quota for the qualified foreign institutional investor plan, approval of smaller-scaled commercial banks to set up fund management firms, and permission of large State-owned enterprises to directly invest in the stock market.
Problems could occur if the capital supply, which is also the demand for stock investment, exceeds either the capital demand or the securities supply, where these funds may be invested to a certain. Such excess in fund supply may cause higher levels of market volatility.
There were already signs that investors are worried about the issue: individual investors began to chase large investors such as mutual funds, rather than investing directly in stocks.
In July, three innovative closed-end mutual funds and several open-end funds raised a total of 72 billion yuan. In one single day, August 1, the BoCom Schroders Fund Management received subscriptions of 35 billion yuan for its new 12 billion yuan blue chip fund product.
Looking at numbers of new investment accounts, it is also apparent that mutual funds became the first choice for many investors. The table below shows new A-share accounts against new mutual fund accounts in eight trading days, beginning July 26, when the Shanghai Composite Index broke its the previous record, from May 29.
New share opening of A share and mutual funds
Source: China Securities Depository and Clearing Co Ltd
|
Date |
A share |
Mutual fund |
|
2007-07-26 |
122,229 |
40,119 |
|
2007-07-27 |
133,009 |
91,863 |
|
2007-07-30 |
163,451 |
224,293 |
|
2007-07-31 |
151,168 |
90,537 |
|
2007-08-01 |
140,251 |
72,085 |
|
2007-08-02 |
128,303 |
600,561 |
|
2007-08-03 |
137,486 |
64,531 |
|
2007-08-06 |
177,224 |
52,171 |
On Six out of the eight days (red), the benchmark Shanghai index closed higher than that of the day before. However, growth in new A-share accounts did not match up with the pattern, as there was even a slide from July 30 to August 2. On August 2, following a 3.8 percent drop in the index, new mutual fund accounts jumped to 600,000, with the new A-share accounts dropping to 128,000.
In fact, once the market goes through extreme fluctuations, newcomers run to mutual funds for security. The data also implies that retail investors are very sensitive to stock price changes and risks, said analysts.
Regulators have been trying for a long time to maintain stability of the market by reducing volatility in order to better protect retail investors. The latest moves include closer monitoring on new shares and the initiation of an investor protection fund.
In the waves of initial public offerings (IPOs) to the stock market, the stock exchanges became more vigilant on the first few trading days by these new shares for possible malicious biddings.
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