Seven Castles

Stay away from the Stock Market - -

                                      

April 21, 2005 

  

   

China is traditionally a gambling-crazy country. Though casinos are prohibited, people here can play gambling in many ways. The most common games are buying lottery tickets and investing in the stock market. In the eyes of most “stock players”, China’s stock market is not a true capital market, but a place worse than a casino. Insider trading, management manipulation, massive speculation and decisions by political fiat are the order of the day and make careful research into annual reports and company backgrounds pretty much a waste of time. When the Premier reiterated the government’s commitment to the Nine-Point Plan for reforming China’s stock markets, or the government announced an official freeze on new domestic initial public offerings (IPO), or the rumor said that the CSRC chairman was to be replaced, the “invisible hands” had the magic effects of boosting markets by a substantial one-day gain at the mercy of the government.

Since the summer of 2001 shares on both the Shenzhen and Shanghai stock exchanges have been falling, in spite of the booming economy. The downturn situation was triggered off by the government’s efforts to find ways to bring the so-called non-tradable state-owned shares (about two-thirds of the total shares of listed companies) to the stock markets to finance the empty coffers of the social security system. The speed of free fall varies, but the general direction is the same. Investors wonder when the bottom will be reached, but the final plunge never comes.

It is hard to see if the market will ultimately collapse or we are just in the darkness before dawn.  The new fact is that a cluster of negative news (most notably, CSRC will soon announce a pilot program for floating the state’s holdings) has wreaked havoc at the stock market and greatly hurt the gambling public.

As the bearish market has been “marginalized” to some extent, it takes longer for Chinese enterprises to get listed in China’s stock exchanges, with more uncertainties and difficulties in desired financing, they have been rushing to get listed on overseas stock markets, which have become a major way to finance Chinese businesses. Investors are becoming increasingly cynical, and the bounce the markets get from government cheerleading is becoming smaller and shorter in duration.

You were told to stay away from drugs and casinos. But now, you have enough reasons to stay away from China’s stock market, another source of evils and sorrow.

- 作者： zhangliping 访问统计：　2005年04月26日, 星期二 08:04 加入博采