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China's army of small investors still believes, despite rout
Investors who piled into China's stock market at the government's behest may have lost heavily in recent months, but many clung Monday to hopes of official rescue even as markets erased the year's gains
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nvestors who piled into China's stock market at the government's behest may have lost heavily in recent months, but many clung Monday to hopes of official rescue even as markets erased the year's gains.
Chinese trading screens were bathed in a sea of green -- the color of falling prices in the country, where red has positive connotations and marks rising values -- as the benchmark Shanghai Composite Index plummeted 8.49 percent, or 297.83 points, to 3,209.91, below its closing level on Dec. 31 last year.
Retired factory worker Ni Dongxia, 72, sat calmly in front of a display in a trading room in Beijing which showed nearly all stocks in Shanghai and Shenzhen in the negative.
He has invested about half his savings in the stock market, but remained confident in authorities' ability to handle the situation.
"The government won't allow the stock market to fall too much and will help it rise again," he said. "The national leadership cares about the people. How could they just let us lose all our money?"
Ni's fellow investors, most of them retirees, sat sipping tea from thermoses, chatting and occasionally walking over to one of the computers along the wall to make a trade.
Almost all of China's more than 90 million stock investors are individuals, according to the China Securities Depository and Clearing Co -- more than the Communist Party has members. This differs from most developed countries, where institutions dominate.
Last year the government triggered a stock market boom by encouraging ordinary citizens, normally deeply wary of equities as investments, to open accounts and invest in shares.
With margin trading common -- where investors borrow to finance their activity, magnifying both profits and losses -- many will have made fortunes on the way up. But since markets turned after an unsustainable rise of more than 150 percent in the year to June 12, the picture has changed.
Ni admitted he did not know much about stock markets and mostly picked large state-owned companies that cropped up a lot in the newspaper, such as oil giant Sinopec and Agricultural Bank of China.
He said he started investing in the stock market after he retired and initially only small amounts -- mostly out of boredom.
"At first I was just playing around to pass time and fill my days," he said. "But with the news of the past few months, I think maybe I shouldn't have invested so much money in the stock market."
Some were putting their money where their optimism was.
Authorities have launched broad interventions to try to restrain the drops, amid concerns they could impact on the real economy, but they have failed to arrest the drops in the face of worries over stalling growth and doubts about valuations.
The latest move came Sunday, when the State Council, China's cabinet, said the national pension fund would be allowed to invest up to 30 percent of its net assets in stocks -- raising the prospect of more than US$150 billion flowing into the markets.
Such news would normally drive the speculation-driven market higher, and Yin Dongqing, a housewife in her 30s, suspected authorities allowed Monday's falls to give the pension fund a cheaper entry point.
"I think today's fall is because the government is trying to let the pension fund enter the market, so they are digging a hole to lower the current level," she said in Shanghai.
"The market will definitely rebound later, maybe after tomorrow," she added. "I actually bought some financial shares today."
Others were plunged into gloom.
"I think the market has no hope. Even if it rebounds, it will fall even more afterwards. I don't have much hope now," office worker Lu Zhongjie told AFP.
'I would really love to sell my holdings," she added, but some were down by their 10 percent daily limit at the open on Monday and trading was halted. "I don't even have a chance to liquidate," she added.
Real estate has traditionally been the preferred destination for China's savers. At the Beijing trading room retired bus driver Zhou Aiguo, 67, said: "I've only put in a little extra money to have some fun.
"I would never trust my savings with something like the stock market," he added. "The stock market is more like gambling.
"I like gambling but I would never take the money I need to live on and walk into a casino."(++++)
