Stocks News
- Shanghai News
Date: 30-Apr-2007 Sources: (Shenzhen Daily)
IN the morning, Ye Jinyong works as a part-time cook at a government office in Shanghai.
In the afternoon, the 57-year-old goes to his broker's office to 'stir fry?stocks, one of a legion of small-time investors lured by the country's stock market boom.
'I don't make a lot of money from my work. I'm trying to supplement my income,'Ye, wearing a white chef uniform, said in an interview at the kitchen where he works. The value of his holdings, he added, has doubled since early last year.
To many economists, analysts and investors, however, Ye's fervour could be a sign of trouble.
'When the bubble bursts, there are serious social consequences,'Andy Xie, an independent economist formerly with Morgan Stanley, said.
He said companies were abandoning their core businesses and some retail investors were even mortgaging their apartments to raise money to buy stocks.
While authorities so far are refraining from heavy-handed tactics like those used to deflate a speculative bubble in the 1990s, fund houses and other worried institutions are tightening their grip on trading practices and information exchanges.
Investors, undeterred, are finding ways around them.
Securities regulators are warning fund managers not to trade stocks for their own account, which is banned on the mainland, after media reports that a veteran fund manager was being investigated on suspicion of violating the rule, industry sources said.
Sources at several fund houses said their firms had begun monitoring internal e-mails, instant messages and phone calls over the past week, in some cases by installing new software.
'Staff are not allowed to talk about information on individual stocks or listed companies or you will be punished seriously,'said an internal e-mail distributed last week by a fund company to all of its staff.
One industry executive said some fund managers were now disguising stock codes by using '800?instead of '600?or '000?-- the first three digits of stock codes of all A shares - when sharing stock tips via instant messaging, to avoid being tracked by computers.
Their zeal is not hard to understand. The A-share market has tripled in value since the start of 2006, bolstered by structural reforms and the listing of large, relatively well-run State companies, as well as rapid growth in China's fund sector.
The surge is drawing hundreds of thousands of investors to the market every day, from college students to pensioners, who are keen to 'stir-fry?stock, Chinese slang for speculation.
More than 10 percent of China's 90 million-plus stock accounts were opened this year, compared with just 5.2 million opened in all of 2006, while turnover in Shanghai's A shares hit a record 202.7 billion yuan (US$26.26 billion) Tuesday, 10 times the year-ago level.
Many fund managers, analysts and economists are worried by the pace of the rises, chiefly led by shares of small firms with poor earnings records, as was a rally in the late 1990s.
A shares are trading at an average of more than 40 times their 2006 earnings, compared with around 14 times for Hong Kong's Hang Seng Index.
The government has kept largely silent on the bull run, which is also fueled by ample fund supplies from China's massive trade surplus, and a string of hikes in interest rates and bank reserve requirements have failed to cool the market.
Talk of another rate hike knocked stock prices down sharply April 19, but they have since recovered all their losses.
Some analysts said the government was trying to avoid using administrative measures to intervene, as it needs a relatively strong market to absorb a flood of large stock issues this year.
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