From Netease: translated by Roy
Last 2 weeks, some cities in China were running short on salt due to the earthquake in Japan. March 17, salt in some supermarket was snatched within an hour. People felt depressed facing the empty salt shelf.
The earthquake in Japan caused the nuclear crisis. With the rumors like “Iodized salt can protect people from radioactivity”, “Chinese salt will be polluted by radiation.” spreading on the Internet and cell phones, people in China all joined into the wave of panic buying of salt.
By coincidence, the hot money played an interesting part in this wave. Yunan Salt & Salt Chemical’s share price shot up before the wave and fell right after. Regulatory departments noticed that, but didn’t have concrete evidence to prove that the hot money is the decisive factor of this wave. But the hot money investors get involved in the stock speculation.
March 12, the Japanese government confirmed the nuclear crisis.
March 15th, Chen who worked in a computer company read a piece of news that as the nuclear crisis in Japan would influence the coast of Shandong, store some iodized salt and sea tangle for relatives and friends, don’t eat seafood for a year. Chen sent the news to his friends. Rumors were spreading on the internet and by telephone, which caused the panic buying of salt.
According to media analysis, some hot money investors held the Salt’s shares in advance and spread the rumors. The panic buying stimulated growth of some shares in “A” share market. Public data showed that Yunan Salt & Salt Chemical’s share price was 12.83 yuan on March 15. 13,960,000 yuan flowed in that day, 9,080,000 is hot money. The trading volume of Yunan Salt & Salt Chemical increased to 93,230,000 from 21,950,000 in a day.
Call volume increased in Zhejiang on 16, 17th , due to the spread of rumors. Supermarkets in Guangdong, Zhejiang, Shanghai ran short on the salt. The trading volume of salt increased by 10 times, which led to a national panic buying soon.
The wave influenced the stock market. Yunan Salt & Salt Chemical’s share price increased to 15.10 on 17th from 12.83 on 15th. It increased by 18% while the largest growth of Shanghai composite index and Shenzhen composite index was about 3%.
Among the 5 business departments who bought the most of the trading volume, 4 were from Zhejiang. The hot money of Zhejiang held 50% of the share with 1.1 billion yuan trading volume, which increased to 2.86 billion yuan. Meantime, Peiling Preserve Szechuan Pickle relative to salt rose by 9.5%, with a 23.35 turnover rate.
On March 28, China National Salt Industry and National Development and Reform Commission responded and the wave stopped. Yunan Salt & Salt Chemical’s share price fell that day and continued to fall after the weekends on 21.
Some principals of Securities Regulatory Bureau said their investigation showed that all hot money investors bought high and sold low the next day. Some blind investors promoted the wave and suffered.
A professor Wang Wei advised that, the department concerned should prevent the “cross-infection” of share prices and the supply of commodities.
The director of Zhejiang Securities Regulatory Bureau said they should strengthen supervision and crack down the speculation of shares. The principal of Shenzhen Stock Exchange said they were supervising the unusual trading. They would take measures and present to competent authorities once found illegal trading.
On 17, some investors suggested suspending the strange Yunan Salt & Salt Chemical. Some people thought management layer should investigate the rumors and the possible organization behind the curtain.
It’s not rare that Department of Securities Commission scotches rumors. In March, 2008, UK and Ireland investigate the rumors that influenced the share prices. At that time some share prices fell by 20% in the market of the 2 counties. Even the relative public companies’ clarity didn’t make a difference.