China state funds start selling in warning sign for stock rally

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BEIJING – Chinese megacap shares fell on Friday (July 10) after two state-backed trimmed their holdings in a that the government wants to slow down the .

People’s Insurance Company (Group) of Ltd., which had become a poster child of the ramp-up in equities, sank as much as 7.5 per cent in Shanghai, while the SSE 50 Index of the city’s largest stocks fell 1.3 per cent. The gauge had closed on Thursday within 2 percentage points of its intraday peak in 2015.

China’s National Council for Social Security Fund – the country’s national pension fund and PICC’s second-largest shareholder – said it plans to sell a 2 per cent stake in the insurer, according to an exchange filing late Thursday. The fund, which oversees about 2.2 trillion yuan (S$437.7 billion) in assets, said the sale was due to “regular divesting activities.”

A rally in Chinese stocks has added about US$1 trillion to equity values this week – far outpacing gains in every other market worldwide. Signs of euphoria among the nation’s investing masses are popping up everywhere: turnover has soared, margin debt has risen at the fastest pace since 2015 and online trading platforms have struggled to keep up.

The National Integrated Circuit Industry Investment Fund Co – a far smaller state-backed semiconductor fund aimed at fostering China’s homegrown chipmakers – also announced plans on Thursday to offload shares in three firms. Textile maker Wuxi Taiji Industry, Shenzhen Goodix Technology, and Beijing BDStar Navigation fell at least 2.5 per cent.

The role of state-backed funds in China’s market landscape became apparent during the 2015 rout, when firms like China Securities Finance Corp. and Central Huijin Investment worked to counter big equity losses.

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