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The ongoing selection of managers to handle the social security fund in the stock market has been catching investors' eyes for months as they anticipate the injection of some fresh blood into the sluggish market.
But will the coming of the social security fund have the power to bring about the long-awaited bull?
The answer is "no."
Only 40 percent of the total national social security fund is allowed to enter the stock market, which means only 30 billion yuan (US$3.6 billion) will be involved in the stock trading.
Besides, who can guarantee that the social security fund will place all the money on the stock market which has been dominated by bearish mood for a long period of time?
The emergence of the social security fund into the stock market is aimed at gaining more yields than by the purchase of bonds or interest from bank savings.
If the stock market means more risk and possibly less return, the social security fund will be reluctant to be involved further as its top priority is safe investment.
It is true that the fund can bring a huge amount of money into the stock market in the long term, as the World Bank predicts that China's total social security fund will amount to US$1.8 trillion by 2030 compared with only 80.5 billion yuan (US$9.6 billion) by the end of last year.
But will the investors have enough patience to wait almost two decades?
Chinese stock investors should know clearly that the bullish stock market cannot be supported fully by the continuous injection of funds.
The main reason for the present sluggish mood is not the shortage of funds as the institutional investors have 200 billion yuan (US$24 billion) of disposable funds.
Investors should expect a more standardized market and improved performance for listed companies to pave the way for the return of the bull rather than the coming of the social security fund.
(China Daily November 4, 2002)
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