Poetry and the art of market makers

If you want to be a savvy investor in the A-share market, you had better be well versed in Chinese literature.

Last Thursday, Xinhua News Agency published an opinion piece with the Chinese-language headline, Dont let the floating clouds block your vision invest on value, right. The headline alluded to a 1050 poem from Song dynasty writer Wang Anshi called Climb the hill that flew from afar.

The original poem goes like this:

I am not afraid of the floating clouds blocking my vision /

Not even if I am in the tower on the peak that reaches the sky

The article encouraged investors to take a long-term approach to stocks. It was obviously meant to talk up the market at a time when punters were panic- selling, but was Beijing trying to hint at something deeper?

The article reminded us of a similar Xinhua commentary in February 2001. Its headline quoted from a 1949 poem from Mao Zedong. The poem, written to honor his friend Liu Yazi, included this line:

You need to extend your vision to know how far the wind could go

The Xinhua article, which explained how the regulator was enforcing rules to prevent one sliding stock from disrupting the market, encouraged investors to maintain order. A rally followed the publishing of that article.

Last weeks Xinhua article was meant to hint at the introduction of new policies. Beijing stepped in at the weekend to prevent state-owned firms from dumping shares of their listed entities onto the market. And then, last night, the government announced it was cutting the stamp duty by two-thirds. Market-watchers expect a strong rally in A shares today as a result.

So next time you see a Xinhua commentary with a mysterious poetic headline, crack open your literature collection. There could be new policies coming out soon.

2008-04-26

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