By Xiao Junxiu and Shen Xing
Aug 11, 2011
Economic Observer Online
Translated by Zhu Na
Original Article [Chinese]

As China’s domestic stock markets reacted to the turmoil on world markets this week, China’s National Social Security Fund (NSSF) decided to step in and purchase at least 10 billion yuan worth of stocks, according to an authoritative source close to China’s pension fund.  

 An employee of a securities company that manages an account on behalf of the NSSF told the EO that the social security fund, which controls over 2 trillion yuan in funds, started buying stocks after markets opened on Aug 9.

 “Through our account they must have spent about 5 billion yuan on stock purchases, if you add the trades completed through other accounts, I guess the total would be more than 10 billion.”

 China’s A-share market opened sharply lower on Aug 9, the Shanghai Composite Index dropped to 2437.68 points, its lowest level in recent days, but at around 10am, real estate and bank stocks started to rise, while iron and steel stocks, along with shares in the nonferrous metal, coal and oil companies all stopped falling.

 This shift in the share price of blue chip companies rapidly lifted the broader market to an intraday high of 2537 points. By the end of trading, the market closed flat with the Shanghai index falling 0.03% on the previous day’s close.

 “Because the NSSF stepped in to purchase shares, this pushed up the price of major stocks, which helped to lift the entire stock index” according to an employee at a security company.

 On Aug 8, the first day of trading on China’s stock markets after Standard and Poor’s downgrading of US credit ratings, the Shanghai’s A-share index fell almost one hundred points, closing down 3.79% on the previous day’s trade – with panic on the markets similar to that experienced during the height of the financial crisis in 2008.

 Whenever the NSSF, or “National Team” as it’s also known, seems to enter the market at just the right moment to pick up stocks at bargain prices, other market players view it as a sign of which way the wind is blowing.