Data in China give some investors an edge

Illustration by Maayan Pearl. Tap: Getty Images

By the staff of Bloomberg Businessweek

April 14, Hong Kong broadcaster Phoenix satellite television posted on the rate of inflation of China of its website March, industrial production and the other eight indicators key economic, citing an unidentified source. When official figures are released in the afternoon and the next day, 9 of 10 digits displayed by Phoenix has proved to be correct. Similar Chinese economic data leaks have frequently circulated in recent months. "The more often we see the markets move strangely before the release of statistics," says Yan Yiming, a lawyer of Shanghai-based securities.

The Chinese authorities suspect that leaks come from officials of various departments and agencies who benefit from rapid access to data. Now, the National Bureau of statistics of China calls for a wave of repression. "Them spread on the Internet State secrets or other public information networks should be held accountable," Sheng Laiyun Office spokesman told journalists in Beijing on April 15.

To help plug the leaks, the agency recently limited the number of people with access to the data. The bureau said it has shortened the time lag between the finalization and release of the price index to 48 hours to 72 hours, and Sheng, said that the Office may further reduce the lag on the publication of that and other statistical data. The Agency seeks to "improve and standardize the process of release of information to make the system fairer, more open and fairer", Sheng said at the briefing.

The benefit obtained by investors who get a jump on statistics can be considerable, especially as China's markets are growing in importance. Prior to release of official data of last June, Reuters reported figures for prices for consumption, exports and new loans exceeded analyst forecasts. The report, quoting an official not identified at an Investor Conference, stimulated the largest gain in index Composite of Shanghai in two weeks and triggered a rally in stock in Europe and the US figures released later by the Government matched or were close to the figures cited in the news report. "Those who have access at the beginning can earn money," said Lu Ting, an economist based in Hong Kong at the Bank of America Merrill Lynch (LAC). Leaks are "an extremely important point."

China's market watchdog does not investigate price movements related to a leak of economic indicators, according to a senior official with the China Securities Regulatory Commission refused to be identified. Insider-rules only apply to persons receiving company-specific information, he said. A rule of implementation by the Government last year, however, made any unauthorized release of economic data punishable of a warning, demotion or firing. The Statistical Office would not say if someone was punished under the measure.

Economic data must be shared in advance with at least 10 departments "to listen to their views and to allow everyone to be prepared," said he Keng, former Director of the National Bureau of statistics and now a member of its Committee of consultants. They include the Ministry of trade. National development and reform of the top economic planner of China Commission; and the people's Bank of China, said. These organizations did not respond to questions by fax. "The bureau of statistics has problems with other departments," said he. "How are we able to control."

Other countries are also faced with leaks of economic statistics. The German Agency of labour last year reduced the number of people involved in the compilation of the unemployment figures to stop the data appearing regularly in the press in advance the official publication. In 2008, Office Britain for National Statistics began to disclose certain official data for some officials only 24 hours before publication, down 40.5 hours earlier. In the United States, voluntary disclosure of protection of data, including economic statistics, is a crime punishable by as much as five years in prison and a fine of $250,000. Then that some traders suspect leakage having occurred, representatives of the United States trade and labour ministries could not recall any incident in recent years.

Shi Yu, Manager of investment for Chinese property developer Nanjing 21st century Investment Group, research of rumours in the days before the publication of economic statistics. In February, Shi read on a forum of cat Internet that inflation in January in China would be a less than 4.9% forecast, a prediction that proved be correct. The following trading day, the benchmark index that index Composite in Shanghai increased 2.5%, the most in two months, help Shi to achieve a percentage of 2 win when he sold shares of mining and metals companies. "In China, it is better to be prepared to be surprised," said Shi. "There is a window of speculation".

The release of April marked the fifth time in six months a specific number price index was reported in the media before its official publication. This figure has become one of the numbers most wanted because of the battle of China to curb inflation, which rose to a maximum of 32 months of 5.4% in March. Higher inflation means that China is more likely to increase interest rates to try to curb economic growth. "People tend to get a little nervous about the interest rates in China," said Sean Callow, a strategist at Westpac Banking in Sydney currency.

The bottom line: After the displacement of economic data on markets, Statistical Office of China reduced the number of people having access in the early figures.

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