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State media campaign aimed at getting investors to buy equities

(Bloomberg) Updated: 2014-09-05 07:00

State media campaign aimed at getting investors to buy equities

Investors at a brokerage in Hangzhou, Zhejiang province. The Shanghai Composite Index rose for a fifth day on Thursday, adding 0.8 percent to close at 2,306.86 points. LONG WEI/CHINA DAILY

Policymakers hope efforts will help reduce speculative investment, risks associated with wealth management products, reports Bloomberg.

State-run media in China are trying to do something the securities industry has failed to accomplish for much of the past three years: get the world's biggest population to buy more stocks.

The Xinhua News Agency published at least eight articles this week advocating equity investing after similar stories appeared in the People's Daily newspaper and on State-run television last month, part of what Everbright Securities Co said is an increased government push to bolster the market. Authorities have also cut trading fees, made it cheaper to open new accounts and organized investor presentations by the biggest listed banks in the past two weeks.

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Huang Shi got the message.

The media campaign "did influence my purchase", Huang, a 26-year-old who works in the finance industry in the northeastern city of Harbin, Heilongjiang province, said after shifting more than 20,000 yuan ($3,200) into shares last week. "Also, our stock market had slumped for so long."

Policymakers are trying to rekindle interest in stocks after the Shanghai Composite Index lost $460 billion of market value in the three years through May, the most worldwide, and investors liquidated almost 5 million trading accounts. A shift toward equities may help the government reduce speculative investing in the property market and curb risks tied to lightly regulated wealth-management products, whose assets rose to a record $2.1 trillion in the first half of the year.

The government's promotion of shares, which follows forecasts for gains this year from brokerages including Citigroup Inc and Morgan Stanley, may already be having an impact.

The Shanghai Composite Index rose for a fifth day on Thursday, adding 0.8 percent to 2,306.86 points, as real estate and financial companies gained on speculation the government is loosening financing curbs for developers.

After shrinking for 12 straight weeks through Aug 8 to the lowest level since March 2010, the number of equity accounts containing funds is rising while the pace of new account openings has doubled since May.

The government is also seeking a buoyant stock market as the country of 1.3 billion people opens up further to foreign investors through an exchange link with Hong Kong scheduled to start in October. The program will allow a net 23.5 billion yuan of daily purchases between Asia's biggest equity markets after Japan.

"The government is indeed encouraging stock investment," Zeng Xianzhao, an analyst at Everbright Securities, said by phone from Chongqing on Wednesday. "They need the market to be vibrant to encourage foreign funds into the country."

Xinhua's commentaries and news stories on equities included headlines such as "China needs a bull market with quality" and "How could the stock market be invigorated?"

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