Page 1 of 2 SUN WUKING China's masses rise up and
buy stocks By Wu Zhong, China Editor
HONG KONG - Mass movements are part of Chinese tradition. Chinese people tend
to act as a group and, whenever conditions are ripe, they rush to join with
someone or some group taking the lead. Hence a "mass movement" can be easily
formed. In the 1960s and 1970s, there were the "all people becoming
citizen-soldiers" movement and the Cultural Revolution launched by
Mao Zedong.
In the era of economic reform and opening up, "mass movements" appear to have
become more spontaneous. In the 1980s, there was a time when "all people rushed
to do commercial businesses". And now we are witnessing another mass movement:
"all people speculating in stocks".
Indeed, as the Shanghai and Shenzhen stock markets keep rising, more and more
Chinese citizens join the army of speculators. On April 26, some 325,000 new
investor accounts were opened on the single day, pushing the total number to
92.5 million. This means one out of every 14 mainland Chinese (including
children and the aged) is now a player. This does not even include those who
trade in shares through investment funds.
Considering that 80% of the 1.3 billion Chinese are farmers, it may be safe to
say that almost all urban adults are stock investors or speculators.
A civil servant in Guangzhou, Wang, said 90% of the staff in his office bought
and sold shares. "During the lunch break, all we talk about in our office is
stocks. I have invested 20,000 yuan. With a big surge in the market, I can make
more money on a single day than my monthly salary."
A taxi driver in Shanghai said driving a cab has became his "part-time" job, as
his "full-time" work is to "speculate in shares". The taxi driver told a
Chinese newspaper that he and his wife have a division of labor in the trade.
His wife goes to an outlet of a securities brokerage house early in the morning
on each trading day. He listens to the radio and give instructions to his wife
by telephone to place orders.
Ma Chunhui, an associate professor with Shenzhen University's College of
Communications, is a veteran investor. Recently he had his students do a survey
to find out whether university students were also speculating in stocks. The
results showed that the more senior a student is, the more likely that he or
she is a speculator. Ten percent of the first-year students speculated in
stocks, and the percentage jumped to 80% for fourth-year students.
Another survey has found that nowadays either in government departments, in
government-funded institutions or in state-owned enterprises, the first thing
more and more staffers do when they arrive in the office is to switch on
computer terminals to obtain market information.
On April 25, the trading volume on both the Shanghai and Shenzhen bourses
exceeded 300 billion yuan (US$38.9 billion), setting a daily trading record. In
late April, Citic Bank, China's seventh-largest lender, launched its A-share
and H-share offerings in Shanghai and Hong Kong simultaneously to raise about
$5.4 billion. But on the A-share part alone, mainland subscribers put in some
1.5 trillion yuan ($195 billion) to bid for the lender's shares.
These days, bank branches in China are often crowded with depositors who rush
to withdraw their savings for stock speculation. A survey conducted by the
People's Bank of China (PBoC), the country's central bank, indicated that a
record low of 59.4% of the 20,000 respondents regarded bank deposits as the
most important financial asset. Meanwhile, an all-time high of 30.7% believed
it pays to invest in the stock market, up 11.7 percentage points over the
fourth quarter last year.
With large sums of money flowing from deposit accounts into stock-trading
accounts, China's savings deposits are growing much more slowly. According to
PBoC figures, the country's yuan savings deposits increased by 1.9 trillion
yuan in the first quarter this year, with the growth down by 60 billion yuan on
the same period last year.
The continuous inflow of large sums of fresh capital is the major force keeping
the Chinese stock markets bullish. The Shanghai Composite Index and the
Component Index of the smaller Shenzhen bourse appear to defy the law of
gravity, shooting up to set new record highs. Warnings by government officials
and experts about the growing risk of a bubble burst are ignored. Beijing's
macroeconomic control measures are defied.
On April 29, the central bank announced another increase of the deposit reserve
ratio for commercial banks. This prompted Hong Kong's Hang Seng Index to drop
about 1% on the second day in a
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