China stock market burns investors with boom-and-bust

AFP, SHANGHAI:  Small-time investor Tracy Li lost more than $3,000 of her hard-earned salary from working at a bank after China’s stock market crashed last summer, wiping out trillions of dollars in valuations in just days.
A year later, and she has been burned twice, betting 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 told AFP. “I bought a stock a friend recommended to me, but now I’ve lost 35 per cent 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 government attempts to prop up the beleaguered market.
Despite Beijing’s best efforts, stock prices remain in the doldrums, with a reform agenda put on the back burner.
Sunday marks 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 per cent slide that it is struggling to recover from.
The benchmark Shanghai Composite Index rose more than 150 per cent in the year to June 12, 2015, 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 fuelled by lax government controls and rash investors looking for a quick profit, in what analysts say is 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 bail-out, and shattered investor sentiment.
But hard lessons were still to come.
As the market plunged, China tasked a “national team” to prop up prices by directly buying at least $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 per cent from the low in August to mid-December.
But 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 ($3,000) 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 told AFP.

China stock market burns investors with boom-and-bust

AFP, SHANGHAI: Small-time investor Tracy Li lost more than $3,000 of her hard-earned salary from working at a bank after Chinas stock market crashed last summer, wiping out trillions of dollars in valuations in just days. A year later, and she has been burned twice, betting 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 told AFP. I bought a stock a friend recommended to me, but now Ive lost 35 per cent 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 government attempts to prop up the beleaguered market. Despite Beijings best efforts, stock prices remain in the doldrums, with a reform agenda put on the back burner. Sunday marks the first anniversary of the day it all began to crumble, when the Shanghai stock markethaving soared in the previous 12 monthsstarted a 40 per cent slide that it is struggling to recover from. The benchmark Shanghai Composite Index rose more than 150 per cent in the year to June 12, 2015, 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 fuelled by lax government controls and rash investors looking for a quick profit, in what analysts say is 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 bail-out, and shattered investor sentiment. But hard lessons were still to come. As the market plunged, China tasked a national team to prop up prices by directly buying at least $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 per cent from the low in August to mid-December. But another crash came in Januarywith global repercussionsafter 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 ($3,000) in January, but he was caught by the renewed fall this year, which was driven by worries over Chinas flailing economy and weakening currency. I was trapped. I didnt even have the chance to cut my losses and before I knew it, I was losing too much money to get out, Huo told AFP.