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Punters rap nameless Chinese official for stock slump

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An "authoritative person"quoted in the official newspaper of China's Communist Party is taking the rap for a stock market selloff that prompted criticism of the financial damage anonymous officials can do.

[SHANGHAI] An "authoritative person"quoted in the official newspaper of China's Communist Party is taking the rap for a stock market selloff that prompted criticism of the financial damage anonymous officials can do.

The People's Daily published an interview on Monday in which it cited an "authoritative person" saying excessive credit growth in China may lead to recession.

Many stock punters thought the article indicated a policy rift in Beijing since the government had done little to stop a sharp rise in new yuan loans in the first quarter. It has also announced several infrastructure projects, widely interpreted as an effort to boost flagging economic growth.

"We should completely abandon the illusion of reducing leverage by loosing monetary conditions to help accelerate economic growth," the person was quoted as saying.

"If we go back to the stimulus-driven path, concerns will rise and the market will hesitate and will not know what to do."

The market did not hesitate; it fell immediately.

The benchmark Shanghai Composite Index shed nearly 3 per cent on the day, wiping off more than US$211 billion in value, according to Reuters calculations.

"I first thought (the article) was forged, because it contradicts previous policies," said Ding Ou, a retail investor, whose stock positions have lost value.

"This article is definitely a blow to the market. I was previously quite optimistic, but now I'm getting pessimistic." Shen Weizheng, fund manager at Shanghai-based Ivy Capital, agreed. "It shows a big divide among policymakers, and makes investors confused," Mr Shen said.

The People's Daily did not respond to telephone calls seeking comment.

The People's Daily is the biggest newspaper group in China and is translated into several other languages, including English, Spanish and Arabic.

This is not the first time articles in the People's Daily in particular, or official media in general, have been criticised for influencing stock prices.

"Is this authoritative figure an institution? Or a person? And where does that authority come from?" Shi Jianxun, a finance professor at the prestigious Tongji University in Shanghai, wrote in a microblog that attracted 150,000 readers in the 24 hours after it was posted.

"After the interview was published, the stock market lost nearly 100 points, and investors suffered heavily. What kind of responsibility should that authoritative figure shoulder?" A signed editorial in the People's Daily in May, 2015, titled "Risk must not be forgotten even in a bull market" knocked 4 per cent off of indexes in a single day.

Possibly its most criticised editorial was in April, 2015, when it predicted a long-term bull run was just beginning. That encouraged retail investors to pour money into what analysts said at the time were already overheated markets, which crashed two months later.

REUTERS