Chinese rue plunging stocks

SHANGHAI

It was wet and gray outside the Shanghai brokerage branch, and just as gloomy inside, as the usual crowd of retirees and housewives stood glumly watching their investments dwindle Friday with each flash of the share-price boards.

“If I can make my money back from the market this time, I promised my wife that I will stay very far away from share trading,” said Gu Zichang, a woebegone looking man in his 50s, as the benchmark Shanghai Composite Index fell for the eighth straight session.

“My wife keeps scolding me, and I can understand how she feels, because I’m also depressed,” he said.

With Friday’s 3 percent decline to 2,868.80, the Shanghai benchmark index has lost 17 percent of its value since it began falling June 3.

The index, which attracted millions of new investors last year as it nearly doubled in value, is down 45 percent so far this year.

Chinese investors, their options limited by government regulations, jumped last year at the chance to make money quickly, shifting billions of dollars out of bank accounts paying only a fraction of a percent in interest to dabble in stock trading.

Many reaped quick fortunes. But many others are now seeing the windfalls evaporate.

“Why is this happening?” said a retired schoolteacher, who like some media-shy Chinese would give only her surname, Zhong. “I expected there to be a technical rebound, based on my past experience, so I used some money I’d saved for traveling to buy stocks last Friday. Now I’m trapped.

“I wish I’d just stayed away,” she said.

Until recently, the conventional wisdom was that the government would be loath to see the market flounder, especially ahead of the Beijing Olympic games, which begin Aug. 8.

Most of the shares traded on both the Shanghai exchange and the smaller bourse in Shenzhen are in state-owned companies, many of them elite, showcase conglomerates. The expectation has always been that the government would continue to indulge in its longtime habit of intervening to keep shares from falling too far.

Some, like Lin Yunzhe, a retired worker who describes himself as an “veteran individual investor,” still subscribe to that belief.

“Let’s see how the government moves to rescue the market. Remember, the Olympics are coming,” Mr. Lin said.

But many investors seem impatient with waiting for market-boosting measures.

Story Continues →