By Yanghong

Beginning in 1998, vigorously develop fund market within a few years, in the meticulous care management, the fund industry has achieved an unprecedented development. The size of the fund market from 1998 to the more than 100 billion yuan to the rapid development of the first half of 2007 of 1.79 trillion yuan. From dozen funds to 338 funds, from the very few fund management companies has risen remarkably to 56 fund management companies, the fund industry’s rapid development has far exceeded the market’s expectations.

Industry systemic risks intensify.

However, due to the existence of market factors and the many unreasonable fund some of the structural deficiencies of the fund industry that contain systemic risks in light of our being near.

Shanghai Composite Index as an example : by the end of 2005 on the index at around 1,000 points, over 52 fund management companies for the management of 217 funds is only 500 billion yuan; And by the end of 2006, the Shanghai index at 2600 points, the same period in the fund market scale reached 800 billion yuan; The first half of 2007, the Shanghai index 4,300 points, the same period in the fund market totaled 1.79 trillion yuan.

We look back at the end of 2004, the Shanghai index at 1260 points, the same period in the fund market is only 320 billion yuan. By the end of 2003, the Shanghai index at 1490 points, the same period in the fund market is only 164.6 billion yuan. This curve is easy to see, after deducting 2001,2002, as open-end fund has just been launched as a result of the continued downturn factors, the 2003, 2004 and 2005, the Shanghai index in more than 1,000 points, the market is the best bet gold cycle, funds and the size of the market does not have an effective to enlarge it. Deduct fund companies marketing efforts and market impact of atmosphere that most of the fund holders is blind.

In 2006 and the first half of 2007, when the Shanghai index from 2000 points to 4300 points advance, the size of the fund market has rapidly in a short period of a year and a half, from 5000-6000 billion yuan expanded to 1.7 trillion yuan, particularly in the 4000 points breakthrough, a large number of purchase, turning the capital funds to expand the scale over 1.8 trillion yuan, a short time, the speed with which its precious. But this time precisely missed the best market start time.

The combined effect of wealth to attract more investors to purchase a large number of funds and fund companies are forced to constantly push up the index, the market higher in the dichotomy also increasing, the fund industry has fallen into a terrible top-heavy. The lower the valuation, the more the market downturn, the systemic risk less; The higher the valuation, the greater systemic risks, the market more frenzied, the fund has increasingly large scale, the influx of incremental funding to force the fund bought a large quantity of the high-level bargaining, the fund was an investment in the most taboo of the inverted pyramid phenomenon.

Large-scale distribution of hidden redemption pressure.

Statistics show that the first half of 2007, 338 funds, which is more than two-thirds of the equity funds, the total size of over 1 trillion yuan. The remaining part of mixed-stock fund ratio above 80%.

According to the country from July 1, 2004 promulgation of the “operation of the securities investment fund management approach”, the equity funds raising to the completion of the period of six months, the holders of not less than 60% of fund assets over the stock, but 60% of the minimum level, no matter what kind of market background under all must abide by. Although this stability to the capital market to preserve, but to fund holders but they were big market risks.

Once trading is a reversal of the huge market of selling pressure, the majority of the fund is not like other agencies as timely wantonly realizable. That is followed by a fund holder is a lot of risk aversion redemption, and the fund was forced to the high prices continuously to meet redemption.

5.30 plummeted from the market after have picked up again it is not difficult to see that the fund redemption pressure markedly increased. Although its short-term macroeconomic still be able to do well, the appreciation of the RMB, the listed companies improve performance and so good, but for investors, is finally realized, futile.

According to statistics, 80% of the Shanghai and Shenzhen listed companies are held or indirectly held other listed companies, securities companies, fund companies and futures companies of the stock, and cross-shareholdings is widespread. Markets around the sequence of the listed company holds a lot of other listed companies and non-listed company shares, after shares changed or the listing of new shares in circulation, the implementation of the new accounting guidelines, a listed company’s net assets, a substantial increase in earnings per share, shares rose sharply rose, the other hold shares of listed companies also indirectly benefit, eventually leading shares rose … one succeeds, the one harmed, “has all the wool comes from the same sheep”, it being understood that the fund based on the cornerstone of its difficult in the high to maintain long-lasting balance.

Of course, they can keep the high launch of the new fund to stabilize the market sentiments; Or as the time to the space to wait for listed companies really the significant improvements in performance; Can also hope soon to be introduced on stock index futures. But do not forget that the largest futures is one of the functions of price discovery function. All the answers is the only announced a time sooner or later.

Copyright Fund China 2009.

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