Irrational exuberance? Not when stocks soar
By Wang Zhenghua and Ida Relsted (China Daily)Updated: 2007-05-14 09:30
Chao, also a senior investment consultant at the brokerage, orders a lunch box every day although his office is located near a street lined with dozens of eateries.
The continuously bullish A-share market has almost tripled in value since early 2006 on the back of structural reforms and the listing of large, relatively well-run State-owned companies, as well as rapid growth in the fund sector. Last week, the Shanghai Composite Index broke through the psychological barrier of 4000 points, closing at 4021 on Friday.
Latest official figures indicate that money is continuously being diverted from banks to stocks. In April alone, 8.4 billion yuan ($1.1 billion) in bank savings flew from Chinese banks in Shanghai, almost double the amount a month earlier. It's estimated that in the first four months this year, 70 billion yuan ($8.9 billion) was diverted from domestic banks, including from deposits, in Shanghai to the capital market.
"The market is booming, so everyone wants to have a go," said Zhang Feng, a 23-year-old junior at Shanghai Fisheries University. His white sneakers and a backpack did not hint at speculation, but that is precisely why he was among a crowd of mixed professions waiting to open accounts at an office of Shenyin & Wanguo Securities Co near Nanjing Road in Shanghai on Friday.
His college peer, Ding Jun, added: "I'm investing 5,000 yuan ($640) which I earned through a part-time job. I have no idea how the stock market works, like the indices, but I plan to read some books on it."
The thronging of individuals blissfully unaware of the pitfalls could be seen as a signal that the stock market is very risky, analysts warned. But the quick money is producing, among others, desperate grandmas, who kill their time by staring at stocks on computer and occasionally playing PC games rather than have a stroll in public parks.
A 69-year-old woman, who wore thick glasses and a lumpy dress, was among the crowd busy checking the fluctuation of shares at Industrial Securities. "I know a little about how to trade online; my children taught me. I don't want to be here because it's really stuffy, but I have to."
With more than two years' experience in the stock market, she is familiar with the changes in the stock market, or at least in the attitudes of clerks at the brokerage.
"Two years ago, I communicated a lot over the phone with the brokers. But now they have many more customers and are no longer nice to everyone. They are very impatient. So I have to come here personally."
Others are gambling their life's savings - their pension.
Ye Yunyi, a 48-year-old retiree, put 200,000 yuan ($25,640) of retirement compensation and savings into the stock market, though she does not know how to handle her investment. "I am not familiar with the market. I will learn gradually from the newspapers and radio."
Wang Jinlin, a 60-year-old retiree who has an ill wife and a college son to support, said he was using the money paid as compensation for his early retirement so he could not afford losing it. The optimistic Wang claimed he would play the stock market until he is in his 80s.
One group of people who are not losing are stock traders. Chao's brokerage,
which has a staff of 30, made 40 million yuan ($5.2 million) in the first four
months this year, more than the amount generated for the whole year of 2006.
Corresponding profits were generated at other brokerages.
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