The FT has written that the value of all stocks traded on exchanges on the Chinese mainland has gone above the figure of all other exchanges in Asia combined. The FT figures on trading from yesterday: "Wednesday’s figure of $49bn was nearly double Japan’s $26.9bn turnover, and triple the $16.5bn combined trading volume of Australia, Hong Kong, Thailand, Singapore, Malaysia, Korea, India, Taiwan, Indonesia, New Zealand and Vietnam."
But, the Chinese markets, lead by the Shanghai exchange, have long been troubled by fraud and insider trading. It is not unusual for insiders to buy shares in IPOs immediately before they go public. It is also commonplace for company officers to sell holdings immediately after IPOs. Both practices would cause prosecution in markets like the US.
According to The International Herald Tribune, the Chinese government also has a hand on the scales: "The government has kept a tight grip on the number of new listings, which has sent recent initial public offerings shooting skyward. Within the past month, Baoshan Steel’s stock shot up 45 percent on its first day of trading, and the value of Mingsheng Bank’s stock rose 70 percent within hours of coming onto the market". Even the Chinese are aware of the issues: "A report, leaked from the Shanghai Stock Exchange and published in the financial monthly Caijing Zazhi, alleges that massive manipulation by China’s fund-management industry may be behind much of the bull market."
Making it into first place by cheating should not count. And, the problems in Shanghai are another indication that the market there could collapse any day.
Douglas A. McIntyre
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