Emotions, politics key factors in stock trading performance

Investors are more likely to make money when their emotions are stable than when they fluctuate greatly, particularly as a result of political events, according to a leading Chinese-language business weekly.

The bimonthly investor sentiment index report, prepared by the Chinese-language weekly Business Today and the finance department at Shih Hsin University, compared respondents' investment performance over the past two months, when opposition lawmakers were gearing up to oust President Chen Shui-bian (陳水扁), with those in March 2004 when the presidential election was held.

The report found that pan-green investors who supported Chen's government stood a higher chance of profiting from the bourse, while a greater number of pan-blues who opposed the ruling party reported losses during these two periods, said Andy Liang (梁永煌), president of Business Today, at a press conference.

For example, 62 percent of the pan-greens polled in March 2004 said they made money from stock investments two months before the election, while only 52 percent of the pan-blues said so.

Similar situations were also seen last week when 1,074 retail investors were polled between June 20 and June 22 about their prospects for the next three to six months.

"Pan-green investors have tended to show stable emotions [in the surveys] as Chen has been in power when the survey started. Pan-blue supporters, on the other hand, have weak confidence in the government, thereby frequently trading stocks to affect profitability," Liang said.

Kuo Min-hua (郭敏華), an associate professor of finance at Shih Hsin University, said their analyses showed that objective factors -- including interest rates, exchange rates and the economic growth rate -- are found to have less impact on the stock market than investor sentiment.

"Those who have a higher EQ [emotional quotient], either optimistic or pessimistic, tend to report better investment results," Kuo said.

If dominated by greed and fear, one is highly likely to become a day trader and suffer losses, she added. The latest survey showed that the investor sentiment index this month plummeted 69.9 points to minus 72.2.

When respondents were asked whether they would increase their stock

investments if the recall motion against Chen was passed, more than 50

percent of pan-blue investors said they would invest more, compared with

less than 40 percent of pan-greens who said the same.

Overall, 70 percent of the polled respondents expressed pessimism toward the

performance of stocks over the next three months.

The recall motion against Chen, whose family is dogged by corruption

scandals, failed to clear the legislature on Tuesday.