BREAKING NEWS
May 29, 2007
Students, Monks and Maids Driving China's Hot Market
BEIJING -- Tian Tingting, a 22-year-old university student, has heard all the gloomy predictions from the experts and the stern warnings from the government. But she has no intention of getting out of China's red-hot stock market.

Ms. Tian, an undergraduate at a Beijing University, is one of the many novice investors provoking a flurry of alarms and official warnings here. China's Education Ministry is telling students to avoid the stock market because it is too risky and too distracting. "It costs them precious time and energy," a Chinese official said on the weekend. "It's inappropriate for college students to invest in stocks."

Yet the rookie investors, including Ms. Tian, are still enthusiastically playing the Chinese market, pushing it to record heights and volumes. Yesterday, Shanghai's benchmark index - the CSI 300 - jumped another 2.2 per cent and breached the 4,000 mark, to 4,072.58, for the first time.

"I admit that the market is overheated and it contains bubbles," Ms. Tian said blithely yesterday, two weeks after investing 20,000 yuan (about $2,800 Canadian) in Chinese stocks. "But I still think the market is relatively safe. The government doesn't want any social chaos, and it knows that a stock market collapse would arouse a lot of disturbances."

Ms. Tian has already earned 1,000 yuan profit from her first two weeks of trading. Her eagerness is matched by many other students, who have even opened their own clubs to play the stock market. "I think the Chinese market economy is developing in a healthy way, and that's why I'm confident in the market," she said.

Despite strong warnings from former Federal Reserve chairman Alan Greenspan and a host of other experts, Chinese investors continue to pour into the stock market. Last week, they opened more than 300,000 new accounts at brokerages every day and have already opened more than 20 million new accounts so far this year, four times the number of accounts opened last year.

The new investors helped set a new peak for trading volume yesterday at the two major Chinese stock markets, in Shanghai and Shenzhen. The value of shares traded on the two exchanges jumped by 17 per cent to reach a record $50.9-billion (U.S.) yesterday - putting China in the same league as the New York Stock Exchange in terms of recent volume. Last Friday, by comparison, fewer than $44-billion in shares were traded on the New York exchange.

But at trading halls in Chinese brokerages, no one seems worried. The stock boom has attracted a flood of new money from millions of newcomers to the market, including elderly pensioners, students, maids, security guards, Buddhist monks, taxi drivers, and even young schoolchildren. A group of 9-year-old students at a primary school in Nanjing is among the latest stock investors. Some Chinese investors are borrowing large sums of money or pawning their possessions to gain money for buying shares.

Mr. Zhang, a 21-year-old security guard at the trading hall of a Beijing brokerage, is earning a monthly salary of less than 1,000 yuan after arriving fresh from the countryside of Hebei province. But he has already taken almost his entire savings - about 15,000 yuan - and sunk it into the stock market. "Some of my colleagues among the security guards have also bought stocks, and some of them have invested more than me," he said.

"The cleaning lady here has also bought stocks, and she earned more profits than me because her stock rose by three yuan while mine only rose by one yuan - everyone says the stock market won't have any problems before the Beijing Olympics next summer."

Mr. Huang, a 71-year-old pensioner, is surviving on a pension of barely 1,000 yuan a month. But he has already invested 3,000 yuan in the stock market. He is planning to learn how to use a computer - a new skill - so that he can trade stocks on the Internet at home.

"I agree that the stock market is overheated," he said. "But when everybody around me has earned money from the stock market, why shouldn't I invest in it? It's better than putting my money in the bank. All of my friends have profited from the stock market."
The Globe and Mail