Small-time investor Tracy Li lost more than US$3,000 of her hard-earned salary from working at a bank after China’s stock market crashed last summer, wiping out trillions of US dollars in valuations in just days.
A year later and she has been burned twice, betting that Chinese government intervention to prop up the market after the rout would guarantee good returns.
“Everybody was saying that the market was starting to rebound,” she said. “I bought a stock a friend recommended to me, but now I’ve lost 35 percent of my investment this year.”
Her story is not much different from that of millions of other private investors who saw their savings go up in smoke during a year of countless attempts by Beijing to prop up the beleaguered market.
Despite the governments best efforts, stock prices remain in the doldrums, with a reform agenda put on the back burner.
Yesterday marked the first anniversary of the day it all began to crumble, when the Shanghai Stock Market — having soared in the previous 12 months — started a 40 percent slide that it is struggling to recover from.
The benchmark Shanghai Composite Index rose more than 150 percent in the year to June 12 last year, peaking at 5,166.35 as the government loosened limits on trading with borrowed money and encouraged buying with glowing commentary in state-controlled media.
The bubble had been fueled by lax government controls and rash investors looking for a quick profit, in what analysts said was an object lesson in the risks of trying to use policy to defy market forces.
When the collapse came, it destroyed fortunes, sparked a costly state bailout and shattered investor sentiment.
However, hard lessons were still to come. As the market plunged, China tasked a “national team” to prop up prices by directly buying at least US$236 billion worth of stocks, according to one estimate, which state-linked entities are still holding after hints they might unload them sparked renewed market panic.
Initially, the measures seemed to work, with the stock market rallying more than 24 percent from the low in August to mid-December last year.
However, another crash came in January — with global repercussions — after the botched implementation of a so-called “circuit breaker,” which was intended to halt trading in case of volatility, but instead created a disastrous feedback loop that drove heavy sell-offs.
Many of those who returned to stocks after the initial crash got burned.
Software company boss Huo Jiayu invested 20,000 yuan (US$3,048) in January, but he was caught by the renewed fall this year, which was driven by worries over China’s flailing economy and weakening currency.
“I was trapped. I didn’t even have the chance to cut my losses and before I knew it, I was losing too much money to get out,” Huo said.
China removed the head of the market regulator responsible for the fiasco, but the debacle raised questions about the government’s managerial abilities and its commitment to promised market reforms.
“The government should avoid stimulating the market through policies. It should strive to build an open, free and fair market under the rule of law,” said Hong Hao (洪灝), Hong Kong-based chief strategist at securities firm BOCOM International.
Investors learned a “profound” lesson, too, he said, becoming more wary of the margin trading — the use of borrowed funds to buy stock — that played a key role in the run-up.
Now, the stock market has recovered slightly from January and February’s plunge, but it is still down almost 20 percent this year, making it the world’s worst-performing market among indices tracked by The Wall Street Journal.
On Wednesday, the last trading day before a holiday, the Shanghai Composite Index closed at almost the exact same level as its low in August last year — the depths of the summer crash — and analysts warned there could still be further losses.
However, none of that has stopped Chinese officials from pushing for domestic shares to be included in global benchmark indices compiled by MSCI — used as a guide by investors to allocate their portfolios. A decision is due tomorrow.
Government reforms to build a more efficient market are still sorely needed, analysts said.
Pressing issues include encouraging more institutional investors instead of individuals bent on short-term gains and a long-awaited revamping of the initial public offering system which gives the market a bigger role.
The year of hard lessons has made regulators gun-shy.
“Market reform has slowed down,” Citic Securities (中信證券) analyst Zhang Qun (張群) said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last