The Chinese Securities Regulatory Commission (CSRC) claimed on July 28 that it would spare no effort in keeping the capital market stable. The National Development and Reform Commission admitted that one of the most important reforms in 2008 is to stabilize the stock market. However, on July 29 and 30, China’s A-share market has continued to go downhill.
Chinese political and financial commentators Wu Fan and Caoan Jushi told the Epoch Times that the government's constant reassurance to the public are signs of an unstable stock market. According to Caoan, the government is even panicked about the market's future.
Fund managers’ recent comments on the falling of stock indexes have become increasingly harsh and nerve-pulling for the government. Recently, the CSRC warned fund managers and stock dealer research institutes not to publish any more negative comments that could potentially hurt market stability.
As the Olympic games approach, the top priority of Chinese fund companies is comforting investors to stabilize the market. On July 28, Shang Fulin, Chairman of the CSRC, spoke at a meeting of the National Securities and Futures Regulatory Commission. He said, “The Olympics opening ceremony is coming soon and the market environment is getting more complicated each day. The regulatory mission is facing tremendous odds and the CSRC will spend all their resources keeping the capital market functioning stably.”
In the past month besides Shang’s speech, state run media has widely reported on the government's attempt to stabilize the stock market. The CSRC called an emergency meeting some time ago with four major securities journals (China Securities journal, Shanghai Securities News, Securities Times, Securities Daily) to focus on topics including, “staying stable” and “the systematic construction of a healthy stock market.” On July 24, the Shanghai Securities News published a commentary that stated, “Multiple efforts were underway to recover our faith and welcome a favorable return of the A-Share Market.”
Wang Chishan, Vice Premier of the State Department, is in charge of financial affairs and went to the CSRC in April to tell fund managers to be “politically sensitive” and asked major fund management companies not to make decisions that would harm the stability of the stock market.
Financial commentator Caoan Jushi believes Beijing is paranoid about a bad future. The stock market in China fell for record highs. Investors have lost confidence in the market and the governments reassurance and Beijing is also extremely worried about a stock bubble. All this worry will surely lay the foundation for the Olympics going wrong. Furthermore, the market could fall even more miserably and China’s economy will continue to recess. However, Caoan believes that no real action can be taken because the overall stock index will still nose-dive after it has fallen past 50 percent of its original value. Caoan believes that after the Olympics, stocks will continue to plunge 60 percent or possibly even a 70 percent.
Wu pointed out the Chinese Communist Party's unwillingness for the stock market to crash especially around the Olympics. If it were to happen, it would be the straw that broke the camel's back.
According to the “Survey of Fund Investment Policy in the Second Half of 2008,” 73 percent of fund managers believe that China's bull market is over.
Managers from over 80 funds left their posts and executive officers of around a dozen fund companies were replaced. In the month of July, 14 fund companies have switched their executive officers.
According to insider reports, almost all fund companies received warnings from government officials asking their fund managers not to speak publicly to the media. A source within the marketing department of an undisclosed fund company said they were not allowed to talk about the short-term market, predict individual stocks, hold large scale meetings, or fund forums.
Wu said, “The stock market is plunging and fund managers are panicking—they have emotions as well. The authorities can't block everything. They can talk in private or via Internet connection and such messages spread easily.”
In Wu’s opinion, the authorities also receive a staggering number of phone calls about saving the market. The investors originally believed there would be a bull market before the Olympics because authorities will try to save face by resurrecting the market. Unfortunately, they face all kinds of tensions and instabilities in society, and they are incapable and unwilling to make sacrifices in order to save the market. According to Wu, if the authorities don't do anything before the Games, they probably will not do it afterward. The market will keep plunging and the economy will continue to approach complete collapse. People in China, including stock investors, will become destitute which may trigger large scale social conflicts at any moment.
Wu advises stock investors to leave the market.
