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Stock market should not be fools' game
To the surprise of many, China's shares bounced back on April Fool's Day, April 1, after hitting a six-year-low just the day before. The benchmark Shanghai composite index shot up by 3.58 per cent to 1,223 points, reportedly because of a rumour that the central government was to postpone the controversial sale of non-tradable State shares by as much as 30 years, according to the Beijing News on Saturday. Had it not been for the special timing, domestic shareholders would be more than glad to see this rebound. The past two weeks of slump not only engulfed all of the rise the Shanghai stock index managed to achieve since the beginning of the year, but also dampened the hope pinned upon listed companies' improved annual reports. In fact, thanks to the robust growth of the Chinese economy which soared by 9.5 per cent in 2004, many listed domestic companies have reaped higher profits than before. But falling stock prices only reconfirm time and time again the increasing discrepancy between the performance of the national economy and the domestic stock market. The benchmark Shanghai stock index shrank by 15 per cent last year, ranking among the world's worst performing markets. It also means, on average, each of the country's 70-million-odd registered accounts in the Shanghai and Shenzhen stock exchanges suffered a loss of more than 2,000 yuan (US$240). China's securities markets began to flounder four years ago when the central government was set to address non-tradable "legal person" shares held by State-controlled entities. Due to the lack of an agreed-upon pricing principle, individual shareholders were afraid that a mass sell-off of State shares which accounted for two-thirds of the total capitalization could glut the market. Though the Chinese authorities suspended such sales after initial trials several years ago, the possibility of future sales still weighs heavily on domestic shareholders minds. Nowadays, the country's stock markets are plagued by many complex and interlocking problems ranging from listed companies' corporate scandals, malpractice by brokerage firms and loose regulations by the securities watchdog. Among them, the selling off of State shares is a basic problem. That explains why the April Fools' Day rumour easily found so many ears among domestic investors. It reflected domestic shareholders' immense desire for policy certainty concerning the key issue of State shares.
(China Daily 04/04/2005 page6) |
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