Risk-addicted Chinese take a punt on the bourse
There were few signs of frayed nerves among the day traders crowded into the small, airless brokerage on the fifth floor of Jingtai Towers in central Beijing on Friday.
"The index is going to double!" gushed one man, who identified himself only as Mr Wang, brushing off the day's small sell-off. "This is good for the country and good for the people."
Some angst would be forgivable. The market has already risen by about 300 per cent in less than two years. The growth in turnover has been even more remarkable. Last Wednesday the value of all shares traded in China outstripped the rest of Asia combined, including Japan and Australia, for the first time ever.
Successive senior officials have issued public warnings of a bubble in stocks. Once, this would have been enough to trigger a sharp sell-off, but investors now enthusiastically ignore entreaties. The Chinese have been opening new stock trading accounts at the rate of about a million a week since the start of the year.
Momentum investing, when traders follow and then accelerate an existing trend, can happen anywhere. But there is no momentum in the world to match ordinary Chinese when they spot a chance, en masse, to make some money.
The most obvious explanation for this is that people have nothing better to do with their money, which many Chinese have a lot of these days. Leaving it in the bank offers them negative returns, after inflation and tax. The property market is expensive and frothy. Unless they're rich enough to evade the law, they are not allowed to take their money offshore.
More important, share trading offers ordinary Chinese the chance to gamble. The ruling Communists banned gambling as a "social evil" after taking power in 1949, but the stock frenzy shows that citizens have not lost their taste for it.
Lynn Pan, the author of many books on China, said a businessman friend had summed up the phenomenon for her as: "The Chinese are addicted to risk."
Cultural fatalism and superstition have long fed the propensity for gambling. But Ms Pan also puts it down to the belief in the importance of luck in getting ahead in a country with a massive population and few clear rules.
In that respect, China is a classic "low trust" society, with a thin layer of widely trusted intermediary institutions and an only recently acquired reliance on property title and contracts. In such a social setting, said Ms Pan, "chance can play a very big part in your life".
Mr Wang and his group of friends, all laid-off workers who now spend their days trading stocks, exhibit a customary cynicism about their chances of beating the market - and the big end of town - in the end.
"This is gambling," quipped one man, with a chuckle. "With the Communist Party in charge, how can we ever win?"
2 comments:
It seems that China stock market have too much bubbles.
Bubbles work like a chain letter. You may have joined a chain letter as a teenager for fun, or as an adult trying to get enough signatures to lobby for a good cause. One letter writer writes to a number of people,instructing each to send the letter on to a number of other people with the same instruction. Letters proliferate, but ultimately the scheme collapses. If the letter involves money (each person in the chain is paid by those joining the chain) the scheme is sometimes referred to as a Ponzi scheme or a pyramid scheme. A few that are early in th chain make considerable money, but most participants are left with nothing.
As we know, bubbles had burst in 1970s,1980s,and 1990s. Especially Asia stock market collapsed in 1990s. So Chinese people should do this as a matter of prudence, to avoid intuitive investment.
Actually, a bubble is already forming in China stock market. It is only to burst as the speculative beliefs are not fulfilled.
Avarice is a man's instinct. Why the bubble burst in U.S. and Asia in 1960s,1970s,1980s, and late of 1990s. Undoubtedly, because of avarice.
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