Tales of other people making money has an amazing ability to
drown out saner counsel.
Market regulators and officials have been shouting themselves
hoarse warning investors of the risks in the stock market, but it
seems to have fallen on deaf ears.
And, some people have indeed made a lot of money as the
benchmark Shanghai Composite Index has jumped 86 percent since
October, closing at another record high of 3319.14 points
yesterday.
In such heady times, it's difficult to remember that what goes
up will come down. Ask those who bought shares in Hangxiao Steel
Structure. They have learnt this the hard way.
Shares in the Zhejiang construction firm fell by their 10
percent daily limit yesterday after the regulators launched an
investigation into the rather irregular trading pattern of the
stock.
Hangxiao's shares more than tripled to 13.79 yuan by Wednesday,
from 4.14 yuan on February 9, propelled at first by market talk and
then by announcements from the company about a 34.4 billion yuan
contract in Angola equal to about one-tenth of that country's gross
domestic product.
Within a minute of starting trade, Hangxiao plunged to 12.41
yuan yesterday, its lowest daily limit, and remained there
throughout the session, after the firm said in a statement that the
stock market watchdog wanted it to cooperate with
investigations.
As evidenced by the thin trading volume, the stock found few
buyers, with the market fearing more losses for those who bought
the shares this week.
Even though the securities watchdog did not give a verdict on
whether the company was involved in any irregular trading and the
company claimed that the investigation was propelled by the
volatility of its shares, most seem to think otherwise.
An online survey conducted by leading Chinese portal Sina.com
yesterday showed 94.2 percent of the 43,837 respondents saying
Hangxiao's trading pattern looked suspicious and 58.3 percent
casting doubt on the 34.4 billion yuan contract.
The Hangxiao case just goes to prove, once again, that there is
still a long way to go as far as transparency of the stock market
is concerned.
Despite the recent regulatory efforts to strengthen corporate
governance and disclosure of detailed information, there are plenty
more loopholes to be plugged in the market.
(China Daily April 6, 2007)