Bloomberg: U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices

[weijian]

No fear, the Chinese GodFather is here.


At 2 p.m. in China, the Stock Market Rescue Suddenly Switches On
Government funds seen buying large-cap shares after declines
World War II victory parade adds pressure to support equities

Afternoons in the Chinese stock market have turned into a waiting game for the state-backed funds to arrive. Over each of the past four days, China’s SSE 50 Index of large-capitalization companies has rebounded by an average 6.4 percent in late trading from session lows. The gauge surged 15 percent over the four-day period, its biggest rally since 2008 and twice the 8.1 percent gain by the Shanghai Composite Index. The SSE 50 climbed 0.9 percent at the close on Tuesday, erasing an earlier loss of 4.8 percent.

The rallies are driven by government-backed funds buying shares to stabilize the market before a World War II victory parade on Thursday, according to IG Asia Pte. China’s 90 million individual investors have been pulling back from the market, with margin debt in Shanghai falling by $10 billion over the past four days to the lowest level since Dec. 25.

http://www.bloomberg.com/news/articles/2...-of-stocks

[CityFarmer]

GS view on China stock in SEHK, not in SSE and SZSE...

Goldman Sachs Still Bullish on China Stocks

Goldman Sachs Group Inc. is sticking with its bullish view on Chinese stocks in Hong Kong, saying valuations are inexpensive and improving economic data will spur a rebound.
“The snapback in China could be fairly meaningful,” Timothy Moe, chief Asia Pacific equity strategist at Goldman, said in an interview Wednesday. “The risk versus reward in terms of what’s priced in the market gives us a sense that if we see a stabilization in macro data, say from here to the end of the year for example, then we could see a decent recovery.”
...
http://www.bloomberg.com/news/articles/2...h-steadies

[CityFarmer]

It used to be, when US sneezes. the world catches cold. I reckon China has achieved close to similar weight-age as US nowadays...

Global sigh of relief from investors as China markets shut down

SYDNEY (Sept 3): Bruce Yu needs a time out.

Like investors around the world, the Franklin Templeton SinoAm money manager has struggled to keep up with escalating volatility in Chinese markets - swings that increasingly set the tone for trading in everything from commodities to U.S. stocks and the Japanese yen.

Luckily for Yu, China is shutting down its exchanges and banks until Monday to commemorate the 70th anniversary of Japan's World War II defeat. The yuan also stopped trading at 4.30pm in onshore markets. No major economic data is scheduled until Tuesday, when August trade figures will be announced.

The holiday gives global investors four days without any price swings or scheduled data releases from the world's second-largest economy.

"Most fund managers are battered and close to desperate" for relief from the turmoil, said Yu, who runs the Franklin Templeton SinoAm China A Shares Equity Fund in Taipei. The holiday "is a good time to clear your thoughts and prepare for what comes next. Hopefully global market volatility will drop."
...
http://www.theedgemarkets.com/sg/article...-shut-down

[greengiraffe]

People’s Bank of China chief sees end to market rout

• DOW JONES
  
• SEPTEMBER 07, 2015 7:14AM
  

[Image: 663052-75a2a8c6-54dd-11e5-84ea-e4e66dcd8634.jpg]
People’s Bank of China chief Zhou Xiaochuan has sought to reassure investors China’s market turmoil is near an end. Source: News Limited
[b]Early this year, Zhou Xiaochuan, the governor of China’s central bank, joined a chorus of official voices talking up the nation’s stock markets as a way to help the economy.[/b]
Now, after an epic bull run turned bust, Mr Zhou is seeking to reassure the investing public again, saying the rout in the markets is nearing an end.
In remarks to central bankers and finance ministers from the Group of 20 largest economies, who held two days of talks in Ankara, Turkey, Mr Zhou said the “correction in the stock market is almost done.”
Moreover, the Chinese yuan is steadying after a devaluation last month, and that means China’s financial markets are expected to become “more stable,” according to a statement posted on the website of the People’s Bank of China.
The remarks come as investors and policy makers worldwide are becoming increasingly concerned about China’s slowing growth.
Turmoil in Chinese stocks that started mid-June, followed by the currency devaluation, spurred fears that the world’s second-largest economy is on the verge of a much faster and deeper deceleration than Beijing is letting on, resulting in recurring currency, equity and bond sell-offs in developing nations.
The published statement to the G20 leaders is the first time Mr Zhou has publicly addressed the market turmoil and the Chinese government’s response to it. He acknowledged what he called a “bubble” in Chinese equities, noting that the benchmark Shanghai Composite Index soared 70 per cent between March and June. The surge, he said, was boosted by investors borrowing money to buy shares and had sowed the seed for risks.
Absent from the published remarks was any acknowledgment of Beijing’s own hand in fanning the flames. Early this year, state media frequently pumped up the stock market, playing up a national strategy of getting cash-strapped companies to tap a rising market in a bid to pay down their existing debts.
In March, Mr Zhou himself sent out what investors interpreted as a “buy” signal when he said allowing funds into stocks could help support the “real economy.”
Officials at the PBOC couldn’t be reached for comment.
After markets began plummeting in June, the government stepped in, ordering state brokerages and other companies to buy shares and restricting some types of selling. Mr Zhou, who, according to people close to the central bank, had opposed aggressive intervention, also sought to publicly justify the government’s subsequent intervention aimed at stemming the stock slide, saying the efforts were intended to “avoid systemic risks.”
The Chinese central bank has been the driving force behind Beijing’s effort to rescue the market. In the statement, Mr Zhou said it has “provided liquidity to the market through various channels.” The government’s actions, Mr Zhou said, prevented the stock market from “falling off a cliff.”
Meanwhile, Mr Zhou reiterated in the statement China’s pledge to press ahead with the overhauls needed to ensure longer-term growth, without going into detail.
The recent devaluation of the yuan, he said, was aimed at bringing the Chinese currency’s value more in line with its peers and giving market forces bigger sway in deciding its value. Despite increased pressure for the yuan to further depreciate following the devaluation, he said, “there is no basis for long-term depreciation” of the Chinese currency.
Separately, China’s Finance Minister Lou Jiwei suggested at the same G20 gathering that China won’t resort to massive fiscal stimulus to spur growth. “The government will not particularly care about quarterly economic fluctuations and maintain steady macroeconomic policy,” Mr Lou said, according to the same statement posted on the central bank’s website.
Dow Jones

[greengiraffe]

• Sep 11 2015 at 3:39 PM 
   
  
  
•  Updated Sep 11 2015 at 3:39 PM 
  

Stir-fried shares and what lies beneath the Chinese crash

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The Chinese sharemarket crash has proved a huge embarrassment for President Xi. Market participants everywhere are awaiting his next move.

NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/k/l/i/9/image.related.afrArticleLead.620x350.gjc5v7.png/1441949987863.jpg[/img]Supplied
by Christopher Joye
A 30-year-old bank market-maker recently remarked, “All I’ve ever known during my career is crises.” And 2015 has not disappointed. Ever since the Reserve Bank’s Guy Debelle complained about unusually benign financial market volatility in September 2014, we’ve had rolling ructions with only brief windows of respite.
After the eurozone was going to be torn asunder in June by the 11 million “irrationalistas” in Greece, investors were head-faked by stability through July. Turmoil quickly returned in August with Australian and global equities plunging as much as 13.3 per cent and 12.6 per cent respectively. Horrific stuff for those long the asset class.
The culprit was the great Chinese sharemarket crash of 2015 which, after being staunched by “strongman” President Xi Jinping’s unprecedented interventions in June, shockingly reasserted itself two months later. This is significant for many reasons.
First, an economy smaller than Queensland’s (Greece) is no longer the tail wagging the dog. China is the second-largest economy in the world and the single most important contributor to global growth.

Second, China’s dramas represent a stealthy battle between free markets and non-democratic central planning, with geopolitical and security consequences. In recent decades the Chinese Communist Party reluctantly embraced Western reforms and open markets to create a sustainable growth platform and establish itself as a respected international-actor-cum-superpower.
But when markets decided the extraordinary “stir-fried” 154 per cent run-up in Chinese equities between August 2014 and August 2015 was hugely overdone, and prices fell 43 per cent, the CCP was not receptive to the gratis advice. (Stir-frying is Chinese shorthand for flipping.) The crash was especially embarrassing for President Xi, who in June told a journalist “it’s good to trade shares” and predicted the Shanghai Composite Index would “soon hit 10,000 points”.
INVESTORS PREVAILED
In its own version of quantitative easing – a euphemism for governments buying assets when they don’t agree with market prices – the CCP has burnt more than $200 billion trying to defend equity values. It also announced draconian restrictions on trading, including banning short sales (punting on price declines), declaring stocks cannot fall more than 10 per cent in a day, and prohibiting sales by individuals who own more than 5 per cent of a company for the following six months.


While these measures initially worked, and stimulated a 10 per cent rally in the Shanghai market in July, investors would prevail in their arm wrestle with the state. The catalyst for the devastating slump in mid-August, which at its peak saw intra-month losses total more than 25 per cent, was the “surprising” decision of China’s central bank to modestly devalue its currency by 3 per cent.
The issue was that China’s exchange rate peg with an appreciating US dollar had led the yuan to become overpriced. Yet investors worried the depreciation was motivated to mitigate deeper, obscured, vulnerabilities across China’s real economy after years of state-directed investments into dodgy infrastructure and housing projects.
Suspicions about the reliability of state-published economic data – many believe the CCP massages it to maintain the illusion of stability – were not helped by HSBC dumping its independent industrial production index, which often conflicted with official numbers.
Humiliatingly for the CCP, the same problems that caused the GFC – excessive leverage and speculative investment in overvalued assets – have been the source of its megabubble. One key difference is that state-owned enterprises dominate the Shanghai market, which may explain why politicians were so keen to blow the bubble.

Although market forces have raised questions about the CCP’s once-unassailable control of the economy, Xi Jinping has not given up, instructing his $313 billion pension funds to buy equities while authorities warn of prosecutions for locals collaborating with “foreign forces to attack the soft underbelly of the market and bet against the government’s stabilisation measures”. One trader’s take on the message was “sell Chinese equities = jail”.
In a world characterised by record leverage, volatility will remain the constant. That’s why I believe in hedging equities exposures.

[greengiraffe]

Alamak even Mata being hit for not doing the job to expectations?

Chinese stock regulator in anti-corruption probe

• GRACE ZHU
  
• THE WALL STREET JOURNAL
  
• SEPTEMBER 17, 2015 2:48PM
  

[b]China has put a top securities regulator who played a high-profile role in Beijing’s stockmarket rescue effort under investigation, in the latest in a spate of probes that have hit officials and brokerages alike.[/b]
The Communist Party’s Central Commission for Discipline Inspection said in a brief statement that Zhang Yujun, assistant chairman of China Securities Regulatory Commission, was being investigated for alleged serious violations of discipline. Mr Zhang couldn’t be reached for comment, and it wasn’t clear whether he was represented by a lawyer.
The party antigraft watchdog didn’t provide further details. In China, accusations of violations of discipline typically amount to shorthand for corruption.
The probe into Mr Zhang’s activities is the latest in a broad sweep undertaken by Chinese officials as they look for ways to stem stockmarket losses.
China’s main stock index is now down nearly 40 per cent from its June peak and down 2.6 per cent since the beginning of the year, though it is still 35 per cent higher than a year ago. The drop has added to worldwide worries about Beijing’s ability to tame volatile markets, a perception also driven by a surprise currency devaluation last month that sent global markets tumbling.
Mr Zhang played a prominent role in efforts to rescue the stock market by a group of regulators and state-run companies called the National Team by official media. Among other efforts, the group bought stocks as they fell and financed a state margin lender that allowed investors to borrow to buy more shares. The group’s efforts haven’t stopped the market’s plunge, though yesterday the Shanghai Composite Index ended up 4.9 per cent.
In an early August meeting with brokerage and fund managers, Mr Zhang called for stepped-up supervision over margin lending and asked them to step up efforts to stabilise the stock market, according to a statement from the regulator. He also urged brokers to strengthen supervision over program trading and to prohibit any “malicious short selling” through the use of program trading, according to the statement.
Chinese authorities said on Tuesday that Cheng Boming, president of major brokerage Citic Securities, and other senior operational officials were under investigation for potentially leaking and trading on unspecified inside information. Citic Securities has said it is cooperating with authorities.
In late August, Chinese official media said Liu Shufan, a top CSRC official, was also a suspect in an alleged insider-trading probe. Mr Liu said on government-run China Central Television at that time that he earned several million yuan by helping win approval for a company’s private placement and then participating in the transaction through proxies. “As a civil servant, I deliberately broke the law and disregarded the laws and rules,” he said.
Authorities also accused a financial reporter in late August of wrongdoing for reporting on China’s efforts to bolster the market. The reporter for Caijing, Wang Xiaolu, was shown on CCTV saying he wrote an article in July that had a “great negative impact on the market.” The article said authorities might scale back official share-buying that was then propping up the stock market. Mr Wang said his report included information from “an abnormal channel” as well as his own “subjective judgment.” It isn’t clear whether the probes are related.
Wall Street Journal

[greengiraffe]

http://www.straitstimes.com/singapore/ch...-reform-pm

This is a optimistic view of an wrong term investor hoping that his perceived views on his bets will come good eventually noting that he continue to hold his views that China wants to exercise influence that is constructive...


To me nobody knows what is going on in the middle kingdom as they can always conveniently add digits behind their connected bank accounts to help save themselves, resolve problems and CONquer the world. Quite similar to Putin, they are organised GODfathers of the modern world...

[greengiraffe]

If You Thought China's Equity Bubble Was Scary, Check Out Bonds
 
 Lianting Tu 
October 9, 2015 — 5:00 AM SGTUpdated on October 9, 2015 — 5:37 PM SGT










Is a Bubble Forming in China's Bond Market?

• Debt prices surge as PBOC eases and funds shift from stocks
  
• China's boom is at odds with world as CDS show rising risks
  

As a rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.
So says Commerzbank AG, which puts the chance of a crash by year-end at 20 percent, up from almost zero in June. Industrial Securities Co. and Huachuang Securities Co. are warning of an unsustainable rally after bond prices climbed to six-year highs andissuance jumped to a record. The boom contrasts with caution elsewhere. A selloff in global corporate notes has pushed yields to a 21-month high, and credit-derivatives traders are demanding near the most in two years to insure against losses on Chinese government securities.
While an imminent collapse isn’t yet the base-case scenario for most forecasters, China’s 42.2 trillion yuan ($6.7 trillion) bond market is flashing the same danger signs that triggered a tumble in stocks four months ago: stretched valuations, a surge in investor leverage and shrinking corporate profits. A reversal would add to challenges facing China’s ruling Communist Party, which has struggled to contain volatility in financial markets amid the deepest economic slowdown since 1990.

“The Chinese government is caught between a rock and hard place," said Zhou Hao, a senior economist in Singapore at Commerzbank, Germany’s second-largest lender. "If it doesn’t intervene, the bond market will actually become a bubble. And if it does, the market could crash the way the equity market did due to fast de-leveraging.”
[Image: 488x-1.png]
The slide in stocks is one reason why corporate bonds have done so well, prompting a 91 percent jump in issuance last quarter. Many investors who sold shares during the Shanghai Composite Index’s 38.4 percent drop from its June high have plowed the proceeds into debt, viewing the market as a haven given its history of almost negligible defaults. Five interest-rate cuts since November have also fueled gains as the People’s Bank of China seeks to revive growth with lower borrowing costs.
Yields on top-rated corporate notes due in five years have declined 79 basis points, or 0.79 percentage point, this year to 4.01 percent. The yield premium over similar-maturity government securities has dropped to 97 basis points, near the lowest since 2009.
By contrast, the yield on corporate notes globally has increased 26 basis points to 2.92 percent. Credit-default swaps on China’s sovereign debt jumped to a more than two-year high of 133 basis points in September and were last at 113 basis points.

Risks Rise
A reversal in the bond market would do more damage to China’s economy than the drop in shares and exacerbate capital flight from the biggest emerging market, according to a worst-case scenario projected by Banco Bilbao Vizcaya Argentaria SA. The Spanish lender more than doubled its first-quarter profit by selling holdings in a Chinese bank.
“The equity rout merely reflects worries about China’s economy, while a bond market crash would mean the worries have become a reality as corporate debts go unpaid," saidXia Le, the chief economist for Asia at Banco Bilbao. "A Chinese credit collapse would also likely spark a more significant selloff in emerging-market assets.”
For all the concerns about a bond rout, default levels in China have so far been remarkably low, thanks in part to government-orchestrated bailouts for troubled firms. Just four companies have defaulted on onshore bonds, including Shanghai Chaori Solar Energy Science & Technology Co., which became the first to renege on its debt in 2014.
Government Firepower
China has the wherewithal to stave off a crisis in its credit markets, according to Ken Hu, chief investment officer for Asia-Pacific fixed income at Invesco Ltd. "Unlike most other emerging-market countries, China has high domestic saving rates, little government debt, healthy fiscal balances, strong trade and current account surpluses, and most of its corporate debts are domestic," he said.
Policy makers went to unprecedented lengths to combat the tumble in share prices, including compelling state-owned firms to buy equities and preventing major stockholders from selling. The Shanghai Composite rose 1.27 percent on Friday, its second straight day of advance after a week-long national holiday.
A recovery in the equity market could be the trigger for a selloff in bonds as money managers liquidate their holdings to catch the rally in stocks, according to Thomas Kwan, the Hong Kong-based chief investment officer at Harvest Global Investments Ltd., whose Chinese unit offers funds through the Qualified Domestic Institutional Investor program.
Warning Signs
The risk of a downward spiral in debt prices has increased after investors took on leverage to amplify their returns, according to Ping An Securities Co. The monthly volume of bond repurchase agreements -- a form of borrowing used by investors to increase their buying power -- has jumped 83 percent from January to 39 trillion yuan in September, according to data from the Chinamoney website.
About 16 percent of companies on the Shanghai stock exchange lost money in the past 12 months, double the proportion last year, and the number of firms with debt levels twice their equity has doubled to 347 since 2007. Profits at Chinese industrial companies sank 8.8 percent in August from a year earlier, the biggest decline since the government began releasing monthly data in 2011.
Baoding Tianwei Yingli New Energy Resources Co., a maker of solar components, could become the latest Chinese company to default on local-currency notes after its parent said it’s unlikely to meet a deadline next week on a 1 billion yuan bond.
“Global investors are looking for signs of a collapse in China, which itself could increase the chances of a crash,” Commerzbank’s Zhou said. “This game can’t go on forever."

[greengiraffe]

China's anti-graft unit to widen checks

   Zhang Yujun, then President of Shanghai Stock Exchange, speaks at a conference in Shanghai, on Nov 24, 2011. PHOTO: REUTERS
Published
3 hours ago
  [url=http://www.straitstimes.com/asia/east-asia/chinas-anti-graft-unit-to-widen-checks#][/url]
Watchdog to target country's financial sector, including central bank and regulators
BEIJING • China's anti-corruption watchdog said it would expand its inspections to major financial institutions, including the central bank and regulatory authorities, which are already under pressure after a spectacular stock market meltdown.
After a series of probes into large state-owned enterprises - in particular, oil firms - the Central Commission for Discipline Inspection, the Communist Party monitor, now plans to target the financial sector.
The new round of inspections will cover the central People's Bank of China, the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the watchdog China Securities Regulatory Commission (CSRC), according to a long list posted online on Friday night.

China Investment Corp, the world's largest sovereign fund, commercial banks ICBC and the Bank of China and the country's major insurance companies will also come under scrutiny.
The anti-corruption watchdog will also examine stock exchange operators in Shanghai and Shenzhen, and the parent company of major brokerage Citic Securities.
After soaring 150 per cent in one year, the two bourses went into a tailspin in June that extended into August, tumbling nearly 40 per cent despite massive intervention by the authorities at a cost of hundreds of billions of dollars.
The frantic and clumsy state intervention was criticised, with some experts questioning the apparent contradiction with Beijing's intention to give a greater role to the market and private sector.
And the failure of the government's efforts to stabilise the stock markets reinforced growing doubts about the effectiveness of its economic policy while Chinese growth is experiencing a severe slowdown.
The authorities also reacted to the stock market crash by launching high-profile police investigations into supposedly illegal transactions to reassure public opinion.
The authorities in August detained a CSRC official and four senior executives from Citic Securities for "stock market violations".
Last month, Citic Securities said police were investigating top officials from the brokerage, including its general manager Cheng Boming, for insider trading and leaking inside information.
The party also said it had placed Mr Zhang Yujun, an assistant chairman of the top securities regulator, under investigation for "serious violations of discipline", a euphemism for corruption.
President Xi Jinping has pursued a highly publicised anti-graft drive since taking office, with thousands of officials falling from power.
But some critics liken the campaign to a political purge and say the Communist Party has failed to introduce systemic reforms to prevent graft, such as public disclosure of assets.
In an article published on Friday by the party's official People's Daily, Mr Wang Qishan, head of the anti-corruption watchdog, urged party members to fall back on China's traditional virtues in curbing corruption.
The party must be under no illusions about how serious the problem is, he said.
AGENCE FRANCE-PRESSE, REUTERS

[greengiraffe]

• Oct 30 2015 at 10:55 AM 
  

As China's sharemarket crashed, these hedge funds returned 70pc

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/t/l/m/m/image.related.afrArticleLead.620x350.gkmm27.png/1446162939572.jpg[/img]Traders chat at their work stations at the Shanghai Stock Exchange. Bloomberg
by Zhang Dingmin
China's summer market selloff wasn't a total rout if you were one of the country's top-performing hedge funds that gained an average 70 per cent as almost 1,300 other funds were wiped out.
The country's top 10 performers, run by Ze Quan Investment, Sunrise Investment, Zexi Investment and Yingyang Asset Management, found gains in the June-August period by heeding a famous maxim: Markets are ruled by fear and greed.
"I was scared," said Jiao Ji, chairman of Sunrise, based in northeastern China's Jilin province, who dumped all his stock holdings in May, sat out the post-June 12 crash, and then made strategic purchases on brief upswings prompted by government intervention in July. Chasing gains at the top of the market was like "sucking blood from the tip of the knife," he said.
Four of Sunrise's funds made the top-10 list of the 2,193 stock funds in China in the three months through August, according to Shenzhen Rongzhi Investment Consultant, which tracks hedge funds. All 10 funds had sold their holdings or stayed out of the market before the June selloff.

Chinese funds have few sustainable strategies to avoid large declines. They mostly only buy and sell shares, rather than engage in tactics such as short-selling and trading in stock-index futures, which Chinese authorities have clamped down on after the market crash. While private investment firms are broadly categorised as hedge funds in China, they differ from their global counterparts in not making extensive use of hedging strategies. That makes it harder to produce consistent returns.
"Pure market timing is very difficult, if not impossible, from a statistical point of view," Hong Yan, Shanghai-based director of China Hedge Fund Research Centre, said by phone. Timing it right becomes crucial because "there are no other tools" for hedging, such as derivatives, he said.
China's stock hedge funds as a whole suffered an average 18 per cent decline from June through August, according to Shenzhen Rongzhi data, while the Shanghai Composite Index fell 30 per cent during the three-month period. The mid-June market crash spurred a $5 trillion selloff. Almost 1,300 hedge funds were liquidated this year as of the end of August,??according to Howbuy Investment Management Co., and only 303 of 2,193 stock funds recorded gains during the June-August period, according to Shenzhen Rongzhi.
Since the end of September, however, the index has risen 11 per cent, prompting some funds to now inch their way back into the market. Yingyang Asset Management, whose Hangzhou-based stock fund was among the top 10, said it expects a 15 per cent market rebound in the fourth quarter, spurred in part by the sharp drop in valuations.


The market rose more than 150 per cent in the 12 months through June 12. Some of the top-performers' high returns were due to just the first two weeks of June before the crash. Gains from June 1 to June 12 alone were big enough to generate a 129 per cent return for the three-month period at Ze Quan Investment's top-performing Jingbo Wealth fund, said Beijing-based manager Xin Yu.
Jiao, whose Sunrise funds including its Risheng and Ririsheng offerings, rose an average 61 per cent during the June- August period. He was prompted to sell in May by seeing large amounts of borrowed money, or leverage, being used to make stock purchases and valuations approaching the highest levels since 2009, even as the nation's economic slowdown continued.
"People didn't believe me then because the market was still surging like everyday," Jiao said by phone from Nong An, a small city in Jilin province, which borders North Korea.
After selling all stocks in his first fund in May and holding onto all cash for three others, Jiao starting buying again July 6, escaping a 20 per cent market plunge in between. Buying newly listed pharmaceutical and tourism stocks and selling them Aug. 5 helped push up returns by about 30 per centage points, Jiao said without naming the targets. Companies that posted gains in the period include Tibet Tourism, which rose 78 per cent, Beibu Gulf Tourism, which surged 65 per cent, and Well Lead Medical, which advanced 58 per cent.

Xin's Jingbo Wealth hedge fund also exited near the top of China's stock market. His funds started to trim positions after the Shanghai gauge topped 5,000, dumping their last stocks on June 12 as the index peaked at 5,178. The funds have since kept stock exposure at about zero, he said.
"The market was frenzied," said Xin, who manages more than 6 billion yuan ($US944 million) as chairman of Beijing-based Ze Quan Investment.
The market rallied briefly in July as the government stepped in with measures attempting to ease the panic. The Shanghai index rallied 18 per cent in two weeks through July 23 after authorities gave state-run China Securities Finance Corporation access to as much as 3 trillion yuan of borrowed funds to prop up stocks, banned large shareholders from selling stakes and ordered state-run institutions to buy shares.
Yingyang No. 7, a 280 million yuan fund that ranked sixth on the top 10 list with a 63 per cent return for the three months, built up stock positions in mid-July after having cut its holdings in May. That enabled the fund to reap "relatively lucrative" profits on military-industry stocks and beneficiaries of the nation's state-owned-enterprise reform, Yingyang Asset Management replied in a written response to questions.

Lu Weidong, manager of the Fuguo No. 1 multi-strategy fund, was more cautious. He shunned stocks when the fund started May 4 and instead only traded in stock-index futures and commodities, enabling a 86 per cent return for the three months ended August, Lu said by phone from Dongguan in southern Guangdong province. Stock-index futures trading has become more difficult since China's regulatory changes.
Ze Quan's Xin and Fuguo No. 1's Lu said market risks are much smaller now than they were in June. While they are now more comfortable with today's valuations, both are still sitting on cash and waiting for clear signs that a rebound is under way, they said.
"We don't do bottom-fishing," Xin said. "We leave the risk of that to others."
 

Bloomberg