China's new gamblers discover it is easier to speculate than to accumulate

It had been a good day for Lian Hongying, despite the collapsing stock market. At the Huaxia share-trading company in central Peking she had netted 600 yuan (pounds 50) profit by selling some shares in a quoted Chinese department-store company. That was about as much as a week's salary in her old job in a foreign bank, which she gave up last year to have more time to play the financial markets. "I just love it," she said.

"My husband and his friend went into the market in 1994, and they persuaded me to join in. Now my whole family lives on it. I do quite well - all my husband's friends praise me."

Ms Lian, 36, spends most days at the broking house; other punters packed into the smoke-filled room had pointed her out as a successful investor.

This has been a nerve-testing month for China's 21 million stock-market investors; a jet-propelled bull run followed by a warning in the Communist mouthpiece, the People's Daily, that shares had reached "abnormal and irrational" levels. That sent prices into free-fall, burning the pockets of millions of new investors. The People's Daily seemed almost gleeful at the dramas. "Stock markets are extremely risky, but in the past few months not a few people forgot this point," said a front-page commentary after the government's warnings.

As a result of the commentary, the paper boasted, "many people have observed the market changes and seen many things revealed and gained an even deeper understanding of the market". The editorial did not take credit for the sharp drop in prices, however. The decline was due to a lack of buying interest, it said.

At Huaxia, government attempts to cool the speculation had not dimmed the enthusiasm this week, although prices collapsed by almost a third after the People's Daily article. Chen Guang, 28, a businessman, said: "Night and day I think about trading shares, much more than I think about my girlfriend. When I make a correct decision, the happiness I feel is unspeakable". In July he made a pounds 3,000 profit selling shares in the Shanghai- quoted Cheng Huang Miao commercial centre.

Mr Xu, 54, a retired truck driver, was playing for smaller stakes. "My pension is not high, so this is the only way to make extra money. So four of us retired old men put our money together and come here in turn. One of our group is very clever; he used to be a cadre in the trade ministry."

Mrs Cai said her 24-year-old son had given up his previous job. "At first he lost money, but now he can support himself from share-trading, and even buys things for me."

China started its stock market experiment in 1990, opening bourses in Shanghai and Shenzhen. This year investors have jumped from 12 million to 21 million, mostly concentrated in big cities. The Shanghai Securities News is printed at 25 sites and often sells its 300,000 copies by breakfast.

With the growing number of people this year chasing a limited number of shares, prices soared. By the time the government decided to cool the speculation, the Shenzhen market had more than quadrupled since the beginning of 1996, and Shanghai more than doubled.

Most of this year's nine million new investors had, until a few weeks ago, only experienced a rising market. Li Qian, spokeswoman for the Shanghai Stock Exchange, said: "Those newcomers are not so clear about the risk. At the beginning they only see profit-making by their neighbours, so they just rush into the market and put their savings in quite high-risk stocks."

The People's Daily article had been published, she said, just before prices "went mad".

Chinese investors have to buy local-currency-denominated "A" shares, while foreign investors buy foreign-currency-denominated "B" shares.

In November, the cheaper "B" share markets also rocketed - doubling in a month - as Chinese investors piled in, believing the authorities were turning a blind eye. The system had relaxed to the stage where flourishing a photocopy of a foreign passport or a Hong Kong ID document was enough to trade on a "B" share account in Shenzhen. The rules have now been tightened again.

China says it remains committed to the expansion of the stock markets. But market regulators have set a deadline of 1 January for China's brokerages to start doing more to teach their clients that markets have bears as well as bulls - just in case the past weeks have not pressed that message home.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
tech
Sport
Andros Townsend is challenged by Vladimir Volkov
football
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Y5 Teacher

£90 - £120 per day: Randstad Education Leicester: Long term position for a KS2...

Graduate BI Consultant (Business Intelligence) - London

£24000 - £30000 per annum + benefits: Ashdown Group: Graduate BI Consultant (B...

Service Delivery Manager (Product Manager, Test and Deployment)

£40000 - £55000 per annum: Ashdown Group: Service Delivery Manager (Product Ma...

English Teacher

£110 - £130 per day: Randstad Education Reading: English Teachers with QTS nee...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week