Another day and another attempt to prop up the Chinese stock market ahead of the Agricultural Bank of China IPO, and the expected avalanche of cash calls from the banking sector. ($40bn of issuance is needed to bolster balance sheets depleted by last year’s loan splurge).
This time it’s the National Social Security Fund (NSSF) which has hatched a plan to increase its holding of Chinese stocks to 30 per cent by the end of the year.
The ‘China Take‘ is the NSSF wants to take advantage of the incredible opportunities this year’s stock market rout in Shanghai have thrown up. Indeed, the Shanghai composite index has fallen 22 per cent this year — one of the world’s worst performers — so opportunities abound.
But with $80bn of assets under management, it’s questionable what impact the NSSF can make.
However, North Square Blue Oak says that misses the point:
The NSSF indicating it will increase its equity positions and that it has opened new stock accounts is likely to buoy the market ahead of the ABC IPO, as retail investors often see the NSSF investment decisions as an indication of government support for the market. It was announcements in October 2008 that the NSSF was opening new stock accounts that created a floor for stock prices, setting the conditions for the strong performance in 2009.
Prepare for the rally then? Any thoughts Antony Bolton?
Related links:
Eclectica May 2010 Manager commentary – Long Room
China, A-shares and double-dip recessions – FT Alphaville
Stop the Chinese steamroller, I want to get off – FT Alphaville