How to Pick Stocks Like the Chinese Government

BEIJING (TheStreet) -- Wanna play China's stock markets just like the Chinese government? If so, pay attention to stock picks made by the National Social Security Fund.

Managers of the more than 1 trillion yuan pension fund for the nation's retirees do not publicly reveal how they invest the roughly 26% set aside for trading domestic shares on the Shanghai and Shenzhen stock exchanges.

But once in a while a state media outlet will let the cat -- or at least part of the cat -- out of the bag.

That's what happened Friday when the Securities Daily newspaper said in a rare report that the fund bought shares worth about 320 million yuan in the fourth quarter 2013. The report was based on an analysis of year-end financial reports filed by listed companies.

The purchases increased the fund's domestic stock market investment to about 1.28 billion yuan worth of shares, up more than 33% in the fourth quarter from the previous three months, the report said.

The fund added at least three companies to its portfolio during the quarter: Jiangte Motor, a lithium-ion battery maker that gets raw materials from its own mines and also builds electric vehicles including wheelchairs; auto parts manufacturer Zhongding Holding, whose customers include General Motors (GM); and Shunxin Agriculture, a consumer food company with products ranging from pork snacks to hard liquor.

Purchased were about 5.6 million shares in Jiangte, which closed higher Friday at 12.94 yuan a share; about 3.6 million Zhongding shares, which fell to 15.53 yuan; and 3.3 million Shunxin shares, which fell to 18.90 yuan apiece.

The report opened a separate window to government stock plays by saying the fund recently increased its holdings in the state-run oil major China Petroleum & Chemical Corp. (SNP), better known as Sinopec, by about 1.1 million shares through a bond-stock conversion program. The fund had bought bonds in 2011 that converted at maturity Dec. 31 into Shanghai A-shares.

Also in the fourth quarter, the report said, the social security fund increased its stakes in several insurance companies, a hybrid seed developer named Longping High-Tech and two chemical manufacturers: Changqing Agrochemical and Dinglong Chemical. Shares in the seed and chemical companies closed lower Friday.

In its most recent official financial statement in April 2013, the fund reported a 4.38% return, or 64.5 billion yuan in earnings, on its total investments in 2012. Without naming investment targets, the fund said two years ago that about half its money goes into fixed assets, while the rest targets domestic market stocks, directly held state company shares, foreign stock and cash.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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