Mr. Shangkong

Investors shocked to discover fund managers' private views

After a conversation between a fund manager and an analyst was leaked, investors digested private opinions at odds with their public comments

PUBLISHED : Monday, 25 February, 2013, 12:00am
UPDATED : Monday, 25 February, 2013, 2:49pm


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The past week proved to be a scandalous one for the mainland's stock market.

A private conversation about the market outlook between one of the mainland's most respected analysts and an influential fund manager was secretly recorded by a third party and then leaked to the public.

The impact? What a shock!

Investors were shocked not only by the bearish views of Cheng Dinghua, an award-winning strategist at Essence Securities, and Xu Xiang, a fund manager at Zexi Investment, but also by how different their off-the-record views were from what they and many of their peers said publicly.

In the conversation, secretly recorded by a salesman who later leaked the recording to the public through the internet, Cheng said he expected the benchmark Shanghai Index could easily fall under 2,000 points next year if inflation rebounded.

What's even worse, both he and Xu expected major institutional investors to sell-off stocks in the last few weeks of February, whereafter the market would enter a months-long correction period.

For public consumption, most fund managers have been talking in recent months about the high possibility of a return of the bull market under China's new leadership led by Xi Jinping.

When the conversation was leaked to the public, the stock market in Shanghai, where about 90 per cent of the daily trading volume is often driven by ordinary retail investors, quickly sank as investors reacted to what the truth about the market outlook could be, compared to what they learned from so-called financial professionals on the record over the past few months.

Both Xu and Cheng strongly condemned the salesman who secretly recorded the conversation and leaked it. Xu's company called the unidentified person's behaviour "unprofessional and illegal".

Well, what the person did was of course not professional practice; but when a fund manager apparently misleads the public about his real view on the market outlook, his practice is nothing but unprofessional as well, isn't it?

The incident was described by many investors as a "Watergate scandal" for Chinese fund managers, and soon after the leak was confirmed at least three major fund management firms issued internal notifications to their managers to urge them to be extremely careful about what they say about the market even on private occasions such as dinners with friends and family.

One term commonly used by fund managers when talking to the media about market trends is "cautiously optimistic", and sometimes they will elaborate a bit to something like "cautiously optimistic in the mid-term but bullish in the long run."

How long is the long run? Five years? Ten years? Twenty years? You will never get a clear answer, and little by little I am becoming more convinced that many fund managers are more like public relations and marketing managers.

But I do understand. What else can they say? Their job is to sell before the music stops or vice-versa; and to do such a job means they must do it first before they tell others when they honestly think the music may stop.


George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit