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Sunday, 21 September 2008
From Boom to Bust, China’s Stocks Casino Loses Luster
China’s middle-class moms and blue-collar pensioners were among the world’s most avid and successful investors last year. Now their record is one of lost fortunes, broken families and protest. More in comments... View PDF
From Boom to Bust, China’s Stocks Casino Loses Luster
By Simon Rabinovitch 20 September 2008
China’s middle-class moms and blue-collar pensioners were among the world’s most avid and successful investors last year. Now their record is one of lost fortunes, broken families and protest.
China’s stock market is down nearly two-thirds in eleven months and the anger of millions of ordinary citizens has unnerved the country’s stability-obsessed government.
Beijing launched an unprecedented rescue package that drove up most stocks the maximum permitted 10 percent on Friday.
Yet amateur investors have been badly burnt and may think twice before venturing back into the casino-like market.
“It’s good the government has come in to rescue the market, but I’m afraid that we haven’t hit rock bottom yet,” said Zhan Ye, a driver for a property company who used to order stock trades from his car as he listened to the radio news.
“As soon as people see prices falling, they’ll just get scared and pull their money out again,” he said.
China’s once raucous brokerages have turned into grim social clubs for investors tallying their losses.
A group of four ladies sat around a small table and played cards in a CITIC Securities office in Beijing last week. Sipping tea, they glanced only occasionally at the share prices lines streaking downwards on the computer screens around them.
One man paced up and down the aisle in tattered leather sandals, pausing only to sift through his handful of walnuts.
Even by the standards of the financial turmoil rocking the world, China’s stock market plunge has been violent.
Millions of people with little money to spare and little knowledge of investing piled into the market as it more than tripled in value in less than two years. Since peaking last October, shares are now back to their level in late 2006.
“Middle-class dreams have been buried. Life savings have vanished just like smoke,” said Zhang Qi, an analyst at Haitong Securities in Shanghai. “Looking ahead, more family investors will stay far away from the stock market.”
Nevertheless, Zhang said Beijing’s rescue package, including a pledge to use government money to buy listed shares, was the boldest in the 18-year history of the stock market and could push shares up for weeks.
Zhou Yu, 25, a Shanghai office worker, was less sure. He cashed his stocks in earlier this year, picking up a laptop, an iPhone and a camera with his profits.
“I’m not planning to go back in right now,” he said. “With the overseas market conditions and economic uncertainty, who knows what the next big trouble will be?”
BURIED DREAMS
The amazing bull run made stock trading a national obsession in China.
The phrase to “stir-fry stocks” entered the vernacular as small investors flipped shares in a speculative frenzy. Chatrooms proffering investment tips exploded online. Demand was so high that those wanting mutual funds had to enter a lottery.
The buying stampede inflated the “A” shares of companies listed in China to a premium of more than 100 percent over the “H” shares of the same companies in Hong Kong. China boasted five of the world’s 10 biggest companies by market capitalization.
Some officials warned of a bubble, but many were also convinced that China was merely reaping its due: share prices, after all, had failed to keep pace with the economy’s meteoric growth since the early 1990s.
The market boom enticed people to shift into stocks from secure, low-interest bank accounts. In so doing, they gave companies a much-needed source of capital, a development that the government had long desired.
The abrupt reversal in fortunes this year endangered the social stability that Beijing prizes above all else.
Popular blogs, such as club.stock.sohu.com, spread word of protests and invited people to join.
A small group of angry investors demonstrated outside the Shanghai Stock Exchange in June, a rare event in China’s big cities, where dissent is strictly controlled.
RESTORING CONFIDENCE
To lure investors back into the fray, the government will have to follow up its rescue package with more sweeteners, some analysts believe.
“How much confidence can be restored, and how many investors can be attracted back to the market, all depends on how generous the government will be,” said Cao Xuefeng, an analyst at Western Securities in Chengdu. “Investors are very wary and practical.”
Even with Friday’s post-government intervention surge, the stock market is still down 65 percent from its peak last October. Corporate profits, derived in part from trading, have dwindled and scores of companies have put listing plans on hold.
In unveiling its rescue package, the government once again stressed the importance of a healthy stock market for Chinese companies and the economy. Its announcement was seen as a commitment to put a floor under prices.
Analysts have said that the year-long collapse means that China’s stocks are attractive buys, with valuations near their lowest in three years.
Yet pensioners and middle-class moms will need strong stomachs before stir-frying stocks again.
Many, like Zhang Zhiqiang, may never recover from the financial devastation of the stock market crash. The retired textile worker, 56, saw his life savings of 600,000 yuan ($88,000) cut in half over the past year.
“I no longer eat well or sleep well. And I try to stay away from home because my wife constantly fights with me,” he said.
1 comment:
From Boom to Bust, China’s Stocks Casino Loses Luster
By Simon Rabinovitch
20 September 2008
China’s middle-class moms and blue-collar pensioners were among the world’s most avid and successful investors last year. Now their record is one of lost fortunes, broken families and protest.
China’s stock market is down nearly two-thirds in eleven months and the anger of millions of ordinary citizens has unnerved the country’s stability-obsessed government.
Beijing launched an unprecedented rescue package that drove up most stocks the maximum permitted 10 percent on Friday.
Yet amateur investors have been badly burnt and may think twice before venturing back into the casino-like market.
“It’s good the government has come in to rescue the market, but I’m afraid that we haven’t hit rock bottom yet,” said Zhan Ye, a driver for a property company who used to order stock trades from his car as he listened to the radio news.
“As soon as people see prices falling, they’ll just get scared and pull their money out again,” he said.
China’s once raucous brokerages have turned into grim social clubs for investors tallying their losses.
A group of four ladies sat around a small table and played cards in a CITIC Securities office in Beijing last week. Sipping tea, they glanced only occasionally at the share prices lines streaking downwards on the computer screens around them.
One man paced up and down the aisle in tattered leather sandals, pausing only to sift through his handful of walnuts.
Even by the standards of the financial turmoil rocking the world, China’s stock market plunge has been violent.
Millions of people with little money to spare and little knowledge of investing piled into the market as it more than tripled in value in less than two years. Since peaking last October, shares are now back to their level in late 2006.
“Middle-class dreams have been buried. Life savings have vanished just like smoke,” said Zhang Qi, an analyst at Haitong Securities in Shanghai. “Looking ahead, more family investors will stay far away from the stock market.”
Nevertheless, Zhang said Beijing’s rescue package, including a pledge to use government money to buy listed shares, was the boldest in the 18-year history of the stock market and could push shares up for weeks.
Zhou Yu, 25, a Shanghai office worker, was less sure. He cashed his stocks in earlier this year, picking up a laptop, an iPhone and a camera with his profits.
“I’m not planning to go back in right now,” he said. “With the overseas market conditions and economic uncertainty, who knows what the next big trouble will be?”
BURIED DREAMS
The amazing bull run made stock trading a national obsession in China.
The phrase to “stir-fry stocks” entered the vernacular as small investors flipped shares in a speculative frenzy. Chatrooms proffering investment tips exploded online. Demand was so high that those wanting mutual funds had to enter a lottery.
The buying stampede inflated the “A” shares of companies listed in China to a premium of more than 100 percent over the “H” shares of the same companies in Hong Kong. China boasted five of the world’s 10 biggest companies by market capitalization.
Some officials warned of a bubble, but many were also convinced that China was merely reaping its due: share prices, after all, had failed to keep pace with the economy’s meteoric growth since the early 1990s.
The market boom enticed people to shift into stocks from secure, low-interest bank accounts. In so doing, they gave companies a much-needed source of capital, a development that the government had long desired.
The abrupt reversal in fortunes this year endangered the social stability that Beijing prizes above all else.
Popular blogs, such as club.stock.sohu.com, spread word of protests and invited people to join.
A small group of angry investors demonstrated outside the Shanghai Stock Exchange in June, a rare event in China’s big cities, where dissent is strictly controlled.
RESTORING CONFIDENCE
To lure investors back into the fray, the government will have to follow up its rescue package with more sweeteners, some analysts believe.
“How much confidence can be restored, and how many investors can be attracted back to the market, all depends on how generous the government will be,” said Cao Xuefeng, an analyst at Western Securities in Chengdu. “Investors are very wary and practical.”
Even with Friday’s post-government intervention surge, the stock market is still down 65 percent from its peak last October. Corporate profits, derived in part from trading, have dwindled and scores of companies have put listing plans on hold.
In unveiling its rescue package, the government once again stressed the importance of a healthy stock market for Chinese companies and the economy. Its announcement was seen as a commitment to put a floor under prices.
Analysts have said that the year-long collapse means that China’s stocks are attractive buys, with valuations near their lowest in three years.
Yet pensioners and middle-class moms will need strong stomachs before stir-frying stocks again.
Many, like Zhang Zhiqiang, may never recover from the financial devastation of the stock market crash. The retired textile worker, 56, saw his life savings of 600,000 yuan ($88,000) cut in half over the past year.
“I no longer eat well or sleep well. And I try to stay away from home because my wife constantly fights with me,” he said.
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