Wandering China

An East/West pulse of China's fourth rise from down under.

Almost 80 percent of stock investors took serious hit in 2011, says survey [Global Times]


According to this report from the Global Times, 22% of 4,764 investors across 50 Chinese cities made money from the stock market last year. The cause? Two are reported to take primacy. 62% attributed losses to prevalence of insider trading and 48% said ‘the listed companies’ business transparency was insufficient.’

80% of investors as a result call for more thorough investigation of insider trading.

For more, check out the China Securities Investor Protection Fund Corporation. Do note their English site only has updates till 2011, however. The Chinese version of the comprehensive report can be found here.

– – –

Almost 80 percent of stock investors took serious hit in 2011, says survey
by Zhao Qian
Source – Global Times, published March 3, 2012

Roughly 80 percent of China’s stock investors lost money last year, with most of them blaming insider trading for their losses, according to a survey released on Friday.

The survey, conducted by the China Securities Investor Protection Fund Corporation, received 4,746 respondents from 50 cities across the country.

Only around 22 percent of investors surveyed made money last year, and nearly 78 percent reported losses, with over 11 percent reporting losses of over half of their investment, according to the report.

In the survey, some 62 percent of the investors ascribed their losses to the prevalence of insider trading, and over 48 percent said the listed companies’ business transparency was insufficient.

Around 46 percent talked about the uncertain macro-economic situation and the lack of clear government policies.

Tu Chunhui, a general manager at the research department at China Development Bank Securities, told the Global Times that the poor performance of the stock market last year could be mainly attributed to macro-economic uncertainties.

“The tightened liquidity negatively impacted the stock market,” Tu said.

“The regulators need to improve their work, including strictly super¬vising listed companies, who wangle their accounts or conceal real business achievements,” Shen Jiawang, a 29-year-old water conservancy project engineer who entered the Chinese stock market in 2007 and suffered big losses last year, told the Global Times.

In addition to increased supervision, analysts said both regulators and the individual investors must improve their risk management.

“The stock market’s issuance and supervision mechanisms should be improved, such as the system for initial public offerings (IPOs),” Li Daxiao, a director of research with Yingda Securities, told the Global Times.

Chinese IPOs tend to be overpriced in the primary market, which can lead to losses in the secondary market, where most of the individual investors buy and sell shares, and “the regulator should take measures to monitor the pricing system,” Li noted.

Li suggested lengthening the period between subscribing for shares and listing companies on the stock market. Then investors would be much more cautious, rather than blindly subscribing to shares without considering the financial risks.

But Li warned that investors should focus on the long-term rather than swarming to speculate in overpriced new shares.

“Many Chinese investors are actually speculators aspiring to sudden wealth overnight,” Li said.

One common Chinese stock market practice is backdoor listing, where a company acquires a listed firm, and uses it as a “shell,” and injects its own assets. Consequently, the company can get its shares listed on the public stock exchanges without undergoing the reg¬ulatory and investor scrutiny required for an IPO. Such shares often perform poorly, but some investors prefer them, hoping for a sudden rise in prices fol¬lowing backdoor investment.

“That is irrational speculation with very high risks involved,” Tu said.

Most of the investors the survey tracked are low-income earners. More than 81 percent of them have monthly incomes below 6,000 yuan ($954), with some 39 percent of them earning between 1,000 yuan and 3,000 yuan per month.

Under current conditions, the regulator needs to “persuade those investors who can’t bear the financial risks to move away from the stock market,” Guo Shuqing, chairman of the China Securities Regulatory Commission, said in a speech posted on the commission’s official website Wednesday.

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Filed under: 52 Unacceptable Practices, Chinese Model, Corruption, Domestic Growth, Economics, Finance, global times

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