Editor’s note: This is a translated and edited version of an article from the Chinese site www.sina.com. The article describes how a large part of investors on the Chinese stock market are private individuals, who very often loose money on their investments. The article states that a staggering 70% of Chinese people who invest in stocks have been losing money during the first half of this year.  

Photo: .cache.netease.com

The Chinese stock market is renowned for its volatility and lack of transparency, making it hard for the millions of investors in the country to carry out an informed and successful investment strategy. A characteristic of the Chinese stock market is the vast amount of individual investors, ranging from young students to elderly people investing their life savings. Most of these investors trade on their own, and are thus not under the protection of an investment fund. These “stock-people” (股民) as they are known in Chinese, more often than not base their trading decisions on so-called insider information, which often turns out to be fake. In an environment with a very low level of transparency and often sub-standard corporate governance, the individual private traders are in a very weak position. Indeed, the speed at which stocks are bought and sold in China has earned it the nickname of chao gupiao or literally to stir fry stocks!

It comes as no surprise then that the majority of the so-called “stock-people” are actually losing money on their investments. According to the newest findings of a Sina Finance report, 70% of people investing in stocks lost money within the first half of this year. Among these, 12% of the investors lost 10% of their investment, 32% lost between 10-30% while 16% lost between 30-50% and lastly almost 8% of investors lost more than half the money they invested.

Mr. Pan’s story is one of only all too many among the numerous individual investors who have lost out in the Chinese rush to invest in stocks. Back in the good days he would always be the first to pay the bill when dining with friends and when swiping the credit card proudly would boast: “today I have earned a lot on my stocks, I’ll invite!” However, recently his eagerness to pay has diminished considerably and his non investing friends tell him: “Recently the stock market has been falling a lot, let us pay now, you can always pay again when the market rebounds.” Before April he had really good luck with his investments and everyday his stock account had profits streaming in, Mr. Pan tells us. Life was easy and it seemed like the flow of money would continue forever; therefore he did not prepare for tougher times and spent all the money he earned. Right now his financial situation is in a complete mess and he doesn’t even dare to log on to his net bank account anymore. What might be even more painful for him is that he does not dare to confront his wife about the economic mess he has created.

The market is however not all gloom and doom, as many investors notice the slight rebound of stocks in recent days and optimism is slowly spreading. The report states that 40% of stock owners believe that the market is on a downward curve, while 20% think that it has already reached the bottom and a rebound is on the way. However 20% of the stock owners believe that the market has not yet reached the bottom, and expect it to continue falling. The moral of the story? Be careful when investing money in Chinese stock markets. It may vanish into thin air before you even know it.
 

Source: sina.com.cn
 

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Keywords: chinese investors private chinese investors Chinese stock market investing in stocks China