Home Technology Chinese share market rises again after earlier volatility, technology stocks the big winners

Chinese share market rises again after earlier volatility, technology stocks the big winners

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Story image for news on technology from South China Morning Post (subscription)


Shanghai’s composite index recovered on Monday after stumbling last week, gaining 4.7 per cent after a slow start to finish at 4829.44.

Its sister index in Shenzhen, where most of the technology stocks are listed, also did well with a rise of 4.86 per cent.

Shanghai’s stock exchange is the world’s best performer, and has soared more than 80 per cent since November.

A surprise cut in interest rates and easy credit have fuelled a rally not seen since the height of 2007.

Technology stocks are among the big winners of this bull-run. The shares of the online video website Beijing Baofeng soared for a record 26 consecutive days after its initial public offering on the Shenzhen Stock Exchange’s ChiNext Index, a board for start up companies.

The company’s chief executive, Feng Xin, said the phenomenal performance is partially due to the Chinese central government’s policy encouraging innovation.

“If investors hear the government is promoting the internet as a concept, they will be influenced when they see a product (like ours) they have been using all this while,” Mr Feng said.

A significant amount of speculation is coming from ordinary investors making decisions based on government policy announcements.

One elderly investor the ABC spoke to at a brokerage firm in Beijing claimed to have a simple strategy when it came to investing its shares.

“I close my eyes, pick one then buy,” he said confidently. “The Chinese stock market is a gamble. If you can’t afford it, stay out.”

Investors borrowing money to gamble on the share market

Some investors are borrowing from security brokerages while others are turning to peer-to-peer lending internet finance companies like Pandai to fund their pursuit of riches.

Pandai founder Roger Ying estimated about half of his customers are taking loans of up to $AU21,000 for that purpose. The annual interest rate is between 18 to 30 per cent.

“The typical demographic is from the age of 27 to 40 and mostly male, but we do see more and more female applicants applying for the stock market,” Mr Ying said of the new trend.

“These are housewives playing or dabbling in the stock market and investing on their husband’s behalf.”

Chinese regulators fearful of a domino effect in the financial system stepped in a few months ago to curb the extent of margin lending — essentially gambling on borrowed money.

Investors are now both fearful and excited as there are concerns about how much more volatility there will be in the future and how much higher the market may soar.

Highly geared individuals like 25-year-old Rachel Liu plans to sell her shares at the next bout of instability because she is worried her earlier gains will be greatly affected.

Ms Liu has ploughed a portion of her savings, used her credit card and taken out a bank loan in order to maximise her earnings.

“A few months ago, I began looking at stocks that were hot and followed the crowd,” the finance professional said.

“I didn’t pay as much attention to the preliminary analysis (of financial reports) anymore.”

China research analysts feel there is reason for the governing Chinese Communist Party to talk up the market because the market’s current performance is good news in an uncertain economic environment.

However they acknowledge it is difficult to analyse the market’s likely direction based on traditional metrics because of the extent of wild speculation from ordinary investors.

Oliver Barron, research head at institutional broker North Square Blue Oak, said people are just buying equities because there is monetary easing which is supporting stock prices.

“There’s also government and state media support and a lot of optimism on economic reform generally,” he said.

“Whenever there is a statement on any sector people are looking for ways to play that.”



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