From pushing stocks to warning on risks: Chinese media is changing the course
China’s propaganda mechanism might work better when it comes to the stock market.
Yesterday the People’s Daily, which is published by the propaganda department of the ruling Communist Party, joined the official Xinhua News Agency and the Securities Times with articles highlighting risks in the nation’s world-beating equity rally. The turnaround, which follows a surge in new stock-account openings to five-year highs last week, reflects concern among authorities that the rally’s unprecedented speed may leave inexperienced investors exposed to losses when shares retreat.
At the same time, it is a departure from just three months ago, when state-run media helped revive interest in the stock market with a series of stories advocating share investments.
The Shanghai Composite Index tumbled 5.4 percent yesterday, paring its gain since the end of August to 29 percent, while the nation’s securities regulator urged investors to act rationally at the end of last week.
The Shanghai Composite rose 2.9 percent to 2,940.01 at the close today, versus a 1 percent drop in the MSCI Asia Pacific Index.
“If the market isn’t cooling itself, it’s possible that the government takes measures to rein in the market,” said Wu Kan, a money manager at Shanghai-based Dragon Life Insurance Co., which oversees about $3.3 billion.
The published material indicates the authorities are worried about the rapid gain in stocks.
“Financial tools are two-edged swords,” Xinhua said in yesterday’s article. “If the market relies on the one-way leverage, it will undoubtedly push up the market’s risk index.”
The People’s Daily said on its micro-blog yesterday that some investors aren’t acting rationally, citing examples of people selling properties to buy stocks. Xinhua said in an article yesterday that the market may be headed for a correction, citing unidentified research institutions.
The Securities Times wrote that an unidentified local stock regulator has expressed concerns about a surge in margin trading.
Xinhua released at least eight articles around the start of September advocating equities after similar stories appeared in the People’s Daily and on state-run television the previous month, part of what Everbright Securities Co. called an increased government push to bolster the market. Authorities also cut trading fees, made it cheaper to open new accounts and organized investor presentations by the biggest listed banks.
The number of new stock accounts opened last week surged to almost 600,000, the most since August 2009, according to data from China Securities Depository & Clearing Corp. That compares with a weekly average of about 145,000 during the past year.
Investors bought 121.8 billion yuan ($19.7 billion) of shares using margin debt through the Shanghai Stock Exchange yesterday, taking the outstanding value of stock purchases with borrowed money to an all-time high of 605.5 billion yuan, according to data from the bourse. Combined turnover in the Shanghai and Shenzhen exchanges was a record 1.24 trillion yuan.
