China's CSF Reveals Trading Tactics

By Staff Writer

Apr 14, 2016 06:54 AM EDT

China Securities Finance Corp (CSF), usually called by its nickname King, has disclosed trading secrets. King's tactics remained a puzzle for many copycat shareholders and short term sellers since then the agency was equipped with over $480 billion by the authorities in 2015 summer.

The king has at last revealed its trading policies as it has become mandatory for all companies in China to expose shareholder details in their annual reports. The filings noted that the CSF's moniker is more than mere publicity. CSF has invested in over 600 firms, ranking among the top 10 shareholders. The agency supports government-run companies and consumer enterprises but avoided small-cap shares with poor market effect.

The agency targeted companies with productivity more than the average level while at the same time restricting its position to nearly 3% of outstanding shares in any one firm. However, the tactics disclosure does not expose the agency's forthcoming plans, according to Pauline Dan, chief of Greater China stocks at Pictet asset Management.

Meanwhile, bearish stock traders are avoiding to bet against CSF that changed into a government device for backing share prices after the nation's $5 trillion market crash in 2015 summer. The Shanghai Composite has increased 16% from a year decline in January. Bloomberg quoted Ronald Wan, chief executive officer of Partners Capital International, who said that investors are closely monitoring the changes in CSF and gauging the agency's trading tactics. He added that the state agency is trying to make gains at the same time backing the stock market.

The government fund's largest shareholdings are in financial firms with hefty scores in China's benchmark indexes. Agricultural Bank of China and Industrial & Commercial Bank of China occupied the eighth position among the agency's ten biggest position as of December end. Government-owned firms like CRRC Corp comprised over 80% of the agency's 100 largest positions. The state fund maintained 2.6% of Kweichow Moutai and 3.1% of Inner Mongolia Yili Industrial Group as of December end.

According to Sandy Mehta, CEO of Value Investment Principles, the filings "might give insight into which shares may get targeted going forward." On an average, CSF's top 100 positions have a return on shares of 15%, which is double that of the entire market. The agency doubled up its revenue and profits in 2015. For most researchers, the agency is too big to ignore.

According to Reuters, stocks in China increased to a three-month peak ahead of first quarter economic growth report. The CSI300 index increased 0.4% to 3,275.83 points and the Shanghai Composite Index grew 0.5% to 3,082.36 points.

THE WALL STREET JOURNAL reported that the economy in China provides relief to investors after struggling a heavy global financial crisis. Exports in china shore up in March, however, continued weak when examined in the US dollar. On the other hand, imports continue to slide hurt by poor commodity prices.

China has been struggling with many serious challenges across the globe. The country is trying to recover its economic position by applying various strategies.

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