When the stock market plunge wiped away the savings of millions of mainland investors earlier this year, Hu Zhong felt lucky his savings survived the bear market once again.
Mr. Hu was among the first stock investors when people were introduced in the late 1980s to a new way of making money - through investing in stocks. Demand for capital was then beginning to build following the country’s opening up.
Mr. Hu, who is in his mid-50s, has invested in the stock market for more than two decades. He laments that small players are always the victims of the boom-and-bust stock cycle.
“Looking back, each mania attracts millions of enthusiastic investors, housewives, pensioners and students to pour their money into stocks. But most of them lose a lot. Only those close to the privileged cliques make money each time the bubble bursts,” he said.
“Now it’s hard to find veteran individual investors in the stock trading room. Most friends, who also invested in stocks in the 1980s and 1990s, have disappeared after losing all bets.”
Mr. Hu recalls the first period of stock mania when share trading on the black market was rife in Shenzhen and the value of some stocks rose more than 100-fold between 1989 and 1990.
“At that time, there were only five stocks in Shenzhen trading in three brokerage houses. Good profits spurred a spectacular bull run on the black market. Officials, workers, clerks, taxi drivers and other residents traded on the black market and viewed buying stocks as a sure path to riches because the market only went up.
“The Shenzhen Development Bank [the first company to list publicly in Shenzhen] soared from 10 yuan to about 260 yuan.”
Two years later, in 1992, Deng Xiaoping told the public he supported the capital market, encouraging many to get into the stock market as a way of getting rich.
“That year was a golden time I will never forget. The market went crazy in May when officials finally loosened controls to allow prices to fluctuate ... following Deng’s words. The Shanghai stock market soared 104.27 per cent from the previous day. Five new shares even jumped 2,500 and 3,000 per cent from their issuing price.”
But the bull market lasted only a month. The Shanghai A-share index dropped, after climbing to a peak of 1,420, to 700 in August and then 393 in November, after the government doubled the stamp tax.
“Those speculators close to officials were lucky to sell off their shares in time,” Mr. Hu said. Ordinary, small-time investors lost the most.
“I still remember seeing a woman crying in the middle of the public trading room. At the time I felt sorry for her. But as time passes I’m not so moved by such a scene.”
Mr. Hu said he had experienced several burst bubbles over the past 20 years, which always resulted in small investors losing their investments.
“Each time, people flock to the stock market, driven by the wish to get rich by sharing in the country’s economic growth. But each time, their middle-class dreams are buried. Life savings have vanished just like smoke.
“China’s stock market has been rising but it is disorderly. A boss of a brokerage house can easily embezzle hundreds of millions of yuan in public investment. And those close to government officials are told of tax cuts before the news is released officially.
“New investors are like newborn calves that don’t fear tigers, but I have learned what to fear.”
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Golden Days When the Market Went Crazy
He Huifeng
20 November 2008
When the stock market plunge wiped away the savings of millions of mainland investors earlier this year, Hu Zhong felt lucky his savings survived the bear market once again.
Mr. Hu was among the first stock investors when people were introduced in the late 1980s to a new way of making money - through investing in stocks. Demand for capital was then beginning to build following the country’s opening up.
Mr. Hu, who is in his mid-50s, has invested in the stock market for more than two decades. He laments that small players are always the victims of the boom-and-bust stock cycle.
“Looking back, each mania attracts millions of enthusiastic investors, housewives, pensioners and students to pour their money into stocks. But most of them lose a lot. Only those close to the privileged cliques make money each time the bubble bursts,” he said.
“Now it’s hard to find veteran individual investors in the stock trading room. Most friends, who also invested in stocks in the 1980s and 1990s, have disappeared after losing all bets.”
Mr. Hu recalls the first period of stock mania when share trading on the black market was rife in Shenzhen and the value of some stocks rose more than 100-fold between 1989 and 1990.
“At that time, there were only five stocks in Shenzhen trading in three brokerage houses. Good profits spurred a spectacular bull run on the black market. Officials, workers, clerks, taxi drivers and other residents traded on the black market and viewed buying stocks as a sure path to riches because the market only went up.
“The Shenzhen Development Bank [the first company to list publicly in Shenzhen] soared from 10 yuan to about 260 yuan.”
Two years later, in 1992, Deng Xiaoping told the public he supported the capital market, encouraging many to get into the stock market as a way of getting rich.
“That year was a golden time I will never forget. The market went crazy in May when officials finally loosened controls to allow prices to fluctuate ... following Deng’s words. The Shanghai stock market soared 104.27 per cent from the previous day. Five new shares even jumped 2,500 and 3,000 per cent from their issuing price.”
But the bull market lasted only a month. The Shanghai A-share index dropped, after climbing to a peak of 1,420, to 700 in August and then 393 in November, after the government doubled the stamp tax.
“Those speculators close to officials were lucky to sell off their shares in time,” Mr. Hu said. Ordinary, small-time investors lost the most.
“I still remember seeing a woman crying in the middle of the public trading room. At the time I felt sorry for her. But as time passes I’m not so moved by such a scene.”
Mr. Hu said he had experienced several burst bubbles over the past 20 years, which always resulted in small investors losing their investments.
“Each time, people flock to the stock market, driven by the wish to get rich by sharing in the country’s economic growth. But each time, their middle-class dreams are buried. Life savings have vanished just like smoke.
“China’s stock market has been rising but it is disorderly. A boss of a brokerage house can easily embezzle hundreds of millions of yuan in public investment. And those close to government officials are told of tax cuts before the news is released officially.
“New investors are like newborn calves that don’t fear tigers, but I have learned what to fear.”
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