Unfazed, small investors stay in China's market

Standing before a bank of computer terminals as the Chinese stock markets opened for business on Thursday morning, the trader was blasé about the slump in stock prices on local exchanges that had triggered a worldwide sell-off two days earlier.

"Stock markets go up and down. I've seen falls before," she says. "Yesterday, I was buying again; I like steel stocks, and iron-ore mining shares."

But Mrs. Wang (she declined to give her first name) is not the power-suited securities analyst she sounds like. She is a kindly looking old lady in brown woolen slacks, sensible shoes, and a warm-green sweater who says that she trades because "it kills time. I've got lots of friends here, and we can chat."

There are tens of millions of small investors like Wang in China, and not many of them understand very much about investing. That is perhaps why none of the amateur punters hunched over their screens at the Yin Tai Securities share-trading house Thursday wanted to take responsibility for the alarm that spread from Shanghai across the world's stock markets earlier this week.

"I don't think I myself have much impact on global stock markets," Wang says modestly. "I only trade about 10,000 to 20,000 RMB a day ($1,300 to $2,600). "Even as a group, I can't believe we had that much influence."

After a five-year slump, Chinese stocks took off like a rocket in 2006. The composite index of China's two exchanges, in Shanghai and Shenzhen, gained 130 percent.

The prospect of that sort of profit sent millions of Chinese into a share-buying frenzy, as they opened accounts in the expectation of getting rich more quickly than had ever seemed possible before.

"It sounds as if investing in stocks is as easy as picking up cash from the ground," says Wang Hong, fund manager for Hengtian Investment Management, a small Shanghai firm that helps individual investors place their funds.

"These days I get a lot of queries from small investors," he adds. "But only 20 percent of individual investors know what they are doing. The rest are naive."

Naive or not, individual investors hold 99.8 percent of Chinese share trading accounts, do 92 percent of trading business, and own 63.6 percent of Chinese shares by value, according to researchers at the Shanghai stock exchange.

And they flock to places like Yin Tai Securities, which occupies the ninth floor of an office block in downtown Beijing. In a low-ceilinged, smoky room full of computer screens set into stand-up cubicles, crowds of citizens, mostly middle-aged or older, spend their days poring over charts and graphs tracking share prices, or simply exchanging gossip and tips.

Those tips do not always work out.

Mrs. Zhou, a retired administrator at a research institute, has been driven to distraction by this week's exceptional market volatility.

"If the markets keep falling the way they did on Tuesday, people like me will not be able to stand it," she complains, fingering a copy of "China Securities Journal," a widely followed tip sheet.

"I lost 10,000 RMB ($1,300). One year of my pension, gone in a single day. I am frightened," she says. "All I have is my pension, and I've put all my savings into stocks."

Page: 1 | 2