The past few days have been among the longest days in the short history of stock market trading in China. Day after day – with only one brief respite this week – stocks traded on the Shanghai stock exchange have fallen. Recently, the Shanghai Composite dropped down off more than 50 per cent from the market's peak last October.
Since the early years of this century, many pensioners have risked their life savings in the Chinese equity markets, partly because other vehicles for investing their assets are few and far between, partly because interest on bank accounts has not kept pace with inflation – and partly because stock market investing is exciting, diverting, an entertaining social activity and carries at least the potential for high returns. But over the past eight months, many individual Chinese investors (90% of total China individual investors) – not only the elderly who gather before the public screens, but also the younger punters who have their own laptops – have lost a substantial part of their net worth (it is said, from a survey, there are 92.51% investors lost their money, only 4.34% are profitable, and 3.15% are equal. Also there are more than 60% investors have lost their money more than half). Not surprisingly, given this development, interest in opening new share-trading accounts in China has cooled.
According to one recent poll conducted by Chinese television, more than 80 per cent of those surveyed said the government was at fault for their market losses.
Some elderly investors expressed: “They could have done something to save the market, but we receive disappointment again and again.”
Market analysts say the market could rebound temporarily if the government were to make strong comments encouraging investors, or step in with other measures that could bolster the market, like the April decision to cut stamp duty on stock trades or the long-awaited launch of stock- index futures. But the inflation, the related impact on corporate profits and the high price of crude oil are likely to continue to depress the market whatever the government does – while the index could well fall further before reaching bottom.
Source: ChiCon News Issue 27, 2008
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