Another Chinese market story

http://www.nytimes.com/2007/01/30/w...&en=5e482dafe4ede723&ei=5094&partner=homepage

BEIJING, Jan. 29 — “Irrational exuberance” has no exact Chinese translation, but no explanation seemed necessary in the bustling lobby of GF Securities. Grungy-looking college students, office workers, retirees and even a pregnant woman in suede boots all jostled into the brokerage on a recent morning, eager to buy stocks and buy them now.......................................

 

Reminds me of 1999 all over again....

 

Chinese United by Common Goal: A Hot Stock Tip


Investors check the board at a securities firm in Beijing. China’s bull market is inspiring great optimism.

By JIM YARDLEY
Published: January 30, 2007

BEIJING, Jan. 29 — “Irrational exuberance” has no exact Chinese translation, but no explanation seemed necessary in the bustling lobby of GF Securities. Grungy-looking college students, office workers, retirees and even a pregnant woman in suede boots all jostled into the brokerage on a recent morning, eager to buy stocks and buy them now.

Wang Yu, 20, slouching on a black sofa in the lobby, said he had already doubled his initial investment of 100,000 yuan, or about $12,900, after jumping into the Chinese stock market barely a year ago. His parents had lent him the start-up money, but now he was feeling confident and mulling over a new investment. Commercial shipping containers, he predicted, could bring big profits.

“A lot of the older investors lost a lot of money, so they are not as optimistic,” Mr. Wang said. “I think it is going just fine.”

Less than two years after share prices collapsed, China’s stock markets are almost going mad, actually, with the leading Shanghai Composite Index approaching 3,000 and Chinese investors flocking to buy shares in record numbers. The bull market is so powerful — the Shanghai market hit a record high last week and was among the best performing in the world last year — that one senior Chinese official has warned against “blind optimism.”

College students, young professionals, retirees and others are buying individual shares or investing in China’s swelling mutual funds. One mutual fund raised $5 billion in a single day. Day trading, meanwhile, is becoming popular with investors, many of whom monitor the market from home on personal computers.

The run is particularly striking because China’s stock markets have historically been stagnant financial backwaters, marred by scandal, weak oversight and fundamental contradictions. Even as China’s economy has roared, the stock market has rarely inspired public confidence or great interest. China’s markets nearly disintegrated in 2005, and one 2003 poll found that 90 percent of investors had lost money.

Public confidence was so low then that half of those investors said they wanted to sell their holdings and abandon the market forever. False accounting was considered rampant, and huge state-owned companies were allowed to list without truly going private or submitting to real oversight by keeping great numbers of nontradable shares.

“You gave these murky companies a ton of money when they did their I.P.O.’s,” said Stephen Green, a senior economist with Standard Chartered Bank in Shanghai. “And then behold, a lot of money disappeared.”

No one is arguing that the Chinese markets are now fully reformed, but enough changes have occurred to inspire new confidence. Many state-owned companies, for example, have settled on formulas to begin cleaning up the problems over nontradable shares.

Meanwhile, many Chinese investors are leaving the bubbly national real estate market and moving money into stocks. Roughly 2.7 million new investment accounts were registered last year, more than triple the number from 2005.

One result is an almost goofy buying binge that many analysts expect to continue.

“We’ve gone from a historic low to a historic high in the space of a year,” said Mr. Green, who specializes in China’s equities markets. “Obviously, everyone is getting a bit scared about the scale of the ramp-up.”

Some analysts are already warning that the market may be overvalued. The possibility of a new downturn sinking millions of Chinese investors is a real concern for the ruling Communist Party, which prizes social stability and is preparing to install a new generation of leaders at a critical party meeting this fall. In the past, angry public protests have erupted over market malfeasance. In late December, Cheng Siwei, a vice chairman of the National People’s Congress, China’s party-controlled legislature, issued the warning against “blind optimism” amid a bull market.

For now, though, public excitement is outweighing anxiety. In Shanghai, one of the most popular local television programs is “Stock Market Today.” The Chinese news media reports that mutual fund managers, who have never made the sort of mind-boggling salaries enjoyed by their American peers, are now receiving bonuses as high as 5 million yuan, or about $643,000, a staggering sum in China.

Everyone seems to want a stock tip.

“When I go to the beauty salon, even the girls who give me a manicure are talking about stocks!” said Shirley Lei, a consultant in Shanghai who worries that inexperienced buyers could be cheated. “They ask me, ‘What should I invest in?’ They say they are doing research.”

Trading houses can seem like carnivals. One brokerage in Guangzhou had installed computers in the landing of a stairwell to handle the torrent of new clients. In Shenzhen, the main trading office of Guosen Securities had opened a second registration counter to handle the daily overflow of new customers. Yang Junming, a nattily dressed account manager, said about 70 percent of clients did not even come to the office but used company software to trade from home.

“At the moment, there are not many investment opportunities for people inside China,” Mr. Yang said, explaining the bull market and noting that young people make up a high percentage of new investors. “For a while, it was real estate. But the improvement of the market’s structure is now encouraging people to buy stocks.”

At GF Securities in Beijing, Zhang Jie, manager of client services, clicked his computer mouse to display different charts of jagged lines detailing market trends. On every screen, the lines shot upward. When the market was in the doldrums, Mr. Zhang said his branch registered about six new clients a week. Last month, he said, the number was roughly 120 new accounts a week.

Mr. Zhang’s job, meanwhile, has gotten much easier. He said he once spent his afternoons calling clients for chitchat that focused on anything but the sinking market. “I’d talk about horses, or we’d chat about golf or about tea,” he recalled. “I just wanted to keep them as customers.”

Mr. Zhang said he expected more ups and downs but also predicted that the Shanghai index would top 4,000 by year’s end.

Out in the lobby, Lu Chao, 24, wore a fashionable leather jacket and helped a friend register to trade. Mr. Lu is a day trader who shares a home computer with his mother, another day trader. He said his investments were up 170 percent since July 2005. He researches companies on the Internet and says he and his mother do not always agree on where to put their money. But they are both confident about the future.

“Of course, the market in China is not as regulated as in America or Britain,” Mr. Lu said. “The Chinese market is much younger, so you are going to have risk. But I think the government is trying to straighten things out so that the market will become stronger.”

His goal was simple. “I want to get rich,” he said.

 

Many state-owned companies, for example, have settled on formulas to begin cleaning up the problems over nontradable shares.





I wonder where could find more info on the methodology for a company to be both state-owned and publicly traded

 

Hi,
Watch out.

China's major index is dropping huge right now. Shanghai index down -3.36% and Shengzhen down -6.27% today!

http://cn.finance.yahoo.com/?u

 

China's Stocks Tumble Most in 21 Months on `Bubble' Warning
By William Bi and Zhang Shidong

Jan. 31 (Bloomberg) -- China's stocks tumbled the most in at least 21 months after a lawmaker said shares are overvalued, fueling speculation the government will act to limit investment.

Only 30 percent of companies listed on the Shanghai Stock Exchange ``are good to invest in by Western standards,'' and investors in the remaining 70 percent will probably lose money, Cheng Siwei, vice chairman of the National People's Congress, said yesterday at a conference in Dubai.

``There is already a bubble here,'' said Zhang Ling, who oversees about $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``Concern is mounting that the government will intervene to pop the bubble.''

The Shanghai and Shenzhen 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, plunged 166.55, or 6.5 percent, to close at 2385.33, cutting this month's gain to 17 percent. That's the biggest one-day drop since the measure was introduced in April 2005.

Of the 300 stocks included in the index, 292 fell. China Vanke Co., the nation's largest publicly traded property developer, and China Merchants Bank Co. led the decline, which was the steepest among markets included in global benchmarks.

The Financial Times, which sponsored the Dubai conference, quoted Cheng as saying China's stock market showed signs of a ``bubble.''

``Every investor thinks they can win,'' the paper quoted him as saying. ``But many will end up losing.'' {more at url}

http://www.bloomberg.com/apps/news?pid=email_en&refer=worldwide&sid=asWCxTdgMAbI