A wild ride

Some of the wildest fluctuations in the market were witnessed only a few days before last week's announcement by Disney and Shanghai's municipal government.

On Oct 27, the Securities Times, a Shenzhen-based newspaper, carried a one-sentence report on its website saying that the Disney project had passed the verification stage set by the country's top decision makers and would soon be officially announced.

This briefest of reports prompted a spectacular rally in the stock market only minutes after it was published.

Jielong Industry Group Corp Ltd (see Chart 1, page 6-7), a Shanghai-listed company, which was believed to own property close to the park's proposed site in Shanghai's Chuansha township, suddenly jumped 10 percent, the daily trading limit in the Chinese market.

Other companies with connections to the Disneyland concept such as Zhonglu Co Ltd (see Chart 2), Cimic Tile Co Ltd (see Chart 3) and Lujiazui Co Ltd, also soared by the same amount, while the benchmark Shanghai Composite Index fell by 2.83 percent to 3021.46 on that day.

These were among the last volatile oscillations in a whole catalog of, at times, difficult to explain movements dating back to 2006, when the first reports of a Disney theme park began to emerge.

Zhonglu and Jielong have been at the center of much of the speculation. Zhonglu saw a consecutive rise in its stock price of 10 percent for nine days in November 2008.

Not everyone has been happy about these strange and volatile movements with small investors, in particular, often finding themselves on the losing end of market activity.

Huang Feng, an investor based in Shanghai, said he now finds it too much of a fairground ride to hold his Disney-related related stocks any longer.

He invested 300,000 yuan on Oct 12 to buy 30,000 shares of Xiamen Prosolar Real Estate Co, which runs a villa project close to the expected site for Disneyland.

Soaring shares

"Its shares surged at a pace beyond my expectation," said Huang, who works for a publishing company in Shanghai.

He sold his holding on 0ct 22, when the stock had made a return of 17.4 percent, fearing any gain would be wiped away in the next speculation.

"I was so scared about its growth rate at that moment. I felt the risk was too high to continue holding it," he said.

At times during the three-year saga of speculation surrounding the project there have been some highly unusual movements in share prices

On May 15 this year, Jielong's price was frozen in a straight line at 15.4 yuan for 70 minutes, suggesting to some that there were unusual forces at work manipulating its price.

"It is very likely that a number of accounts were manipulated by speculative investors at the same time to avoid regulator investigations," said Li Ran, a 26 year-old investor who works for a securities firm in Beijing.

"Apparently, only a highly manipulated market could have such a strange performance," Li said.

Daryl Guppy, a leading trend analyst who is an expert on market movements and a keen watcher of Chinese markets, said the pattern was unusual, but he doubted there was manipulation on this occasion.

"Sideways movement on high volumes shows agreement about the value. It's common in a market that is waiting for a news release. It is like the calm before a storm, " he said.