Karen, here in Canada the govt. is considering investing our Canada Pension Plan money in the stock market for the first time.
I believe this is a risky proposition. One reason behind a government attempting to invest large amounts of money (from whatever source) in a stock market is to change the Demand/Supply situation. Demand for stock, in the short term, will increase causing an artificially inflated market, because of the shortage of supply. This increase is a temporary one, and can not be sustained. Another would be to have more money invested long term (staying in the market) so that markets will not fluctuate as much from regular investor money moving in and out. There will be a larger amount of "base" money in the market, almost like a "grass roots" investing style. The managers of these funds would likely affect the markets adversely, because their actions and direction would be so influential to the overall market. I believe that this reasoning is flawed, because it does not promote a healthy market.
The Thai government is attempting to do this and I do not believe it will have a long term positive effect. In Canada's case, they would likely have to invest in the Canadian and blue chip type stocks, and I do not believe there is enough stock for them to buy. The Ontario Teacher's Federation had to look at other markets for investments because they had a large amount of money, even though I believe they wanted to invest solely Canadian. The Canadian government would have an extremely difficult time convincing us that they should be able to invest our money in other markets. It would be a self-defeating act. |
