National pension fund raises investment in mainland market

Fund buys A shares to stabilise market, cutting back on Hong Kong-listed mainland firms

PUBLISHED : Friday, 09 November, 2012, 12:00am
UPDATED : Friday, 09 November, 2012, 3:59am

China's national pension fund has increased its A-share purchases as part of efforts to help stabilise the market, while cutting H-share holdings which have begun trading at a premium to their mainland-listed counterparts.

Based on the third-quarter earnings reports by all mainland-listed firms, the National Social Security Fund (NSSF) held A shares worth 50.4 billion yuan (HK$62.5 billion) at the end of September, 2.5 billion yuan more than its holding at the end of June, according to the state-owned Securities Times.

The increase of A-share holding was against a 6.3 per cent drop in the key indicator between July and September.

The pension fund actually owned more than 50.4 billion yuan of A shares since earnings reports published only holdings of the top 10 shareholders of the companies.

Analysts predicted the NSSF had also bought additional shares in those public firms of which it held small stakes.

However, the pension fund heavily dumped shares in Hong Kong-listed mainland firms, including Citic Securities and Industrial and Commercial Bank of China at the same time, according to public data by the Hong Kong stock exchange.

In October, the NSSF opened 16 new trading accounts, slating an additional eight billion yuan for A-share buying, while continuing to cutting its H-share holding. It dumped three million shares in Chongqing Machinery and Electric and sold 500,000 shares of Sinopharm in Hong Kong late last month.

"The pension fund aimed to boost A-share market while feeling queasy about the H shares," said Dazhong Insurance fund manager Wu Kan. "But it doesn't necessarily mean it's not bullish on overseas-listed stocks. It will buy more H shares in future."

On the mainland, the NSSF used to heavily buy shares when the market sentiment was weak, a move to bolster investor confidence.

In the past few years, a buying spree by the pension fund would lead to a market rally, as thousands of retail investors followed its step to purchase shares.

But buying interest remained low this year as investors were worried about worse corporate earnings amid the economic slowdown.

Mainland-listed shares normally traded at a huge premium to Hong Kong-listed counterparts, but the contrasting performances in the two markets this year caused the mainland stocks to trade at a discount to H shares in mid-October.

A shares of companies dual listed in the mainland and Hong Kong traded at a 1.4 per cent discount to H-shares yesterday.