• Sat
  • Nov 29, 2014
  • Updated: 3:30pm
Mr. Shangkong
PUBLISHED : Wednesday, 07 November, 2012, 5:08pm
UPDATED : Wednesday, 07 November, 2012, 8:44pm

The impact of politics on stock prices

Will the upcoming 18th National Congress of the Communist Party of China affect Chinese stock market investors? Don’t hold your breath.

BIO

George Chen is the financial editor and columnist at the South China Morning Post. George has covered China's financial industry and economic reforms since 2002. George is the author of Foreign Banks in China. He muses about the interplay between Shanghai and Hong Kong in Mr. Shangkong columns every Monday in print and online. Follow George on Twitter: @george_chen
 

Will the upcoming 18th National Congress of the Communist Party of China affect Chinese stock market investors? Don’t hold your breath.

People say that history always repeats itself and the impact on the benchmark Shanghai Composite Index during previous meetings of the National Congress might offer some insight into what to expect this time.

The 17th congress: 5903.3 points on October 12, 2007 (opening date of the congress) versus 5818.0 points on October 19, 2007 (closing date); the index lost 85 points in total, down 1.4 per cent.

The 16th congress: 1554.2 points on November 7, 2002 versus 1460.8 points on November 14, 2002; the index lost 93 points, down 6.0 per cent.

The 15th congress: 1242.7 points on September 11, 1997 versus 1172.4 points on September 18, 1997; the index lost 70 points, down 5.7 per cent.

The 14th congress: 660.3 points on October 9, 1992 versus 632.4 points on October 19, 1992; the index lost 58 points, down 4.2 per cent.

This year is unique as the US presidential election and China’s once-in-a-decade leadership transition occur in the same week, which is why some market participants claim that the impact on stock markets could be greater this time than on previous occasions.

This may also explain why financial media outlets such as Bloomberg keep blaming the US elections and China’s national congress for falling mainland stock prices.

Well, just a few days ago, I read some headlines that attributed rising stock prices to the two same events due to the fact that traders and analysts (quoted by some stock market reporters) believe investors should now buy stocks ahead of an imminent end to political uncertainty.

Whether prices rise or fall is not the question. It seems stock market reporters and their best friends – traders and analysts in the stock markets – can always find something to explain any rise or fall in stock prices.

So, what gets your vote? Bear or bull?

 

George Chen is the financial services editor at the South China Morning Post. The opinions expressed in the column Mr. Shangkong are all his own. Follow him on twitter.com/george_chen or weibo.com/georgeschen

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