People’s Daily Attacks “Man-Made” Stock Market Fluctuations
The collapse of a highly leveraged, 3 billion yuan (US$436 million) takeover bid for a Shanghai-listed animation company this month shone a spotlight on a shadowy corner of China’s stock market that is worrying the authorities in Beijing.
The bidding vehicle, Longwei Culture and Media, was set up in Tibet in November by wealthy actress Zhao Wei and her husband Huang Youlong with registered capital of just 2 million yuan. A month later, it offered 3.06 billion yuan for a controlling, 29 per cent stake in Zhejiang People Culture (ZPC), a former property developer that now produces cartoons.
The Shanghai Stock Exchange asked the two companies to explain where the funding was coming from after ZPC made the bid public, causing its share price to rally. The answer from Longwei, released via ZPC, raised even more questions: Zhao and Huang were proposing to pay 60 million yuan from their own pockets, with 1.5 billion yuan borrowed, with no collateral, from Yinbixin, a trust investment firm based in Tibet, and another 1.5 billion yuan borrowed from an unidentified bank, using the ZPC shares as collateral.
Mainland law is silent on leveraged takeovers – even ones with a sky-high leverage ratio of 50, as in the proposed ZPC deal – and there are no rules preventing trust companies from funding them.
…Now, as the leadership prepares for a big reshuffle at the top of the Communist Party later this year, the authorities are digging deeper into fishy deals to bring “big crocodiles” – tycoons who pull the strings behind the curtains – to account and root out potential sources of financial instability that could also have political implications.
Meanwhile the People’s Daily is asking how to manage “man made” fluctuations in the market? And signals no stock market bull market, yet.
From the policy point of view, a stable policy tone is conducive to stable stock market, to avoid ups and downs. This year’s policy tone has been clear, to stabilize and improve macroeconomic policies, continue to implement a proactive fiscal policy and sound monetary policy.
While seeing positive factors, also need to keep a clear. University of Foreign Trade Professor Hao Xuguang that China’s economy into the initial recovery stage, although not yet shown strong, but at least there are signs of the bottom, and supply side reform, “along the way” construction and so on to promote smooth, so that stock investors confidence has increased The However, it should be noted that China’s economy has not yet crossed the “three superposition” mark, transformation and upgrading is not in place, although in recent years the new kinetic energy in the growth, but also can not make up for the weakening of the traditional momentum gap, difficulties and challenges can not be underestimated.
For example, some of the current excess capacity industry is still facing difficulties, some zombie enterprises are still drawing valuable resources. These conditions are also reflected in the listed companies, and some companies continue to decline in profitability, debt burden heavier.
If you buy and sell based on People’s Daily and Xinhua official media signals, this is a cautious buy.
Just released a case of market manipulation case shows that Shengmou in a few days, the use of their own accounts, the use of capital advantage to a large number of declarations to buy “Ying Witeng” stock, lift, maintain the stock price, then reverse Sell, and thus quickly obtain illegal gains.
China Securities and Futures Commission Chairman Liu Shiyu recently in the national securities and futures regulatory meeting mentioned: “There is no fluctuation of the capital market is a pool of stagnant water, but the storm must be the law of the jungle, the market is manipulated.” It can be seen that the stock market abnormal fluctuations, often some People stir muddy water, engaged in illegal acts caused by “man-made fluctuations.” Strict supervision, to create clean and bright market space, is to promote the stability of the stock market, an important part of the risk prevention.
Zhang Jianjun said that China’s stock market is still in the emerging and transition phase, with a strong immature characteristics. New shares listed fraud, shell resources hot, frequent financing of listed companies, over-financing, the use of non-public offering pricing mechanism arbitrage, major shareholder irregularities and insider trading … … all kinds of chaos for the stock market safe operation buried hidden dangers. Strict supervision, comprehensive supervision, is the key to the move.
After the Spring Festival, the small plate company Shandong Molong to the market cast a “bomb”, causing a great uproar. According to its announcement, the previous 2016 performance is expected to hurt the drift, face after the annual performance is expected to -6.3 billion to -4.8 billion, performance prediction seriously “inaccurate.” In the notice of losses and the disclosure of this huge loss notice, the company’s actual controller “precision” hit the time difference, a large number of stocks and no timely announcement.
Data show that as of mid-February this year, A shares of listed companies important shareholders, directors and their relatives of the net reduction of the total amount of 10.768 billion yuan, while the amount of last year’s reduction is more than 360.9 billion yuan. Last year, 338 shareholders holdings have become zero, to achieve “clearance” reduction. Some of the major shareholders of listed companies before the release of bad news reduction, or in the high turn after the reduction. These holdings not only allow the market to “lose blood”, under pressure, may also involve violations, disrupting the market order.
Shares in Shandong Molong Petroleum Machinery plunged as much as 15.6 per cent on Friday despite its board apologised for warning it would post a significant net loss for last year, three months after saying it expected to record a profit.
Reuters: Shandong Molong says securities regulator investigating chairmanAside from cases like these and big “crocodiles,” the market is dominated by retail investors who like to herd:
From the A-share market reality, individual investors account for more than 100 million households, large and some institutional investors speculative strong, big into the big, fast forward and out, the market “flock effect” is very strong, easy to form behavior Convergence, follow the trend of operation. Because of this, A-share market repeated “jump days monkey” type ups and downs. How to establish long-term stability mechanism, but also the future development of the issues to be concerned about.
Stock market as a big “pool of funds”, if the short-term liquidity into the big, it will set off waves in the market. An unusually volatile market in 2015, an important reason is the high influx of high-leverage funds in the short term, and then quickly evacuated. To prevent the flow of non-normal access to the stock market to maintain stable operation is essential.