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Investors in a Shanghai stock exchange hall. CFP
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After the New Year holiday in 2007, as workers returned to their place of employment, a brutal cold front moved across Beijing, producing some of the lowest temperatures of the winter. But the frozen winds whipping down the concrete corridors did not chill the enthusiasm of new investors out to cash in on a stock market even hotter this year than last.
At 9 a.m. on a freezing January 4, Wang Shuo, 28, arrived at the Huaxi Securities Beijing Branch in the northwestern corner of the city's Zizhu Overpass. He was there to open an account and, to his surprise, about 40 other Beijingers were already qued up ahead of him.
China's markets boomed in 2006. The Shanghai Composite Index increased from 1,000 to 2,800 points last year, and many made a killing. Wang, who works at an insurance company, watched as many of his colleagues racked up big bucks in the market. Wang decided it was time for him to carve out his own piece of the pie, and he set out to join the millions of others already at the table.
In 2006 the Shanghai Composite Index increased by 130 percent, and both the total market value and daily trading volume reached historical highs. An online survey revealed that 70 percent of investors reaped profits in 2006, and most achieved profit margins of 20 to 50 percent. In addition, 21 percent of respondents realized profit margins of 10 percent, and 14 percent of investors increased their funds by 50 to 100 percent.
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January 26, 2007: Customers line up to open securities accounts at the Guotai Junan Securities business hall in Zhengzhou, Henan Province. CFP
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Zhou Yumin, employed by a foreign-funded company, is one of the winners. Usually working at night, in the day he has time to monitor the stock index. He eventually hit big with a stake in the Orient Group Corp. Early in 2006, he took notice of the company's performance and he bought in big in mid-April. The price surged sharply at the end of the month and almost doubled a month later. That's when he sold.
At the start of 2007, China's stock market drew in increasingly large numbers of investors. Statistics released by the China Securities Depository and Clearing Corp., Ltd. reveal that nearly 100,000 securities accounts were opened on January 23, nearly 30 times that over the daily average in 2005. Within the first 12 days of 2007, the daily trading volume of the stock market held at about 140 billion yuan.
Of course, the stock market presents both opportunity and risk. From January 31 to February 2, the Shanghai Composite Index decreased by 300 points, and newcomers like Wang Shuo personally experienced the unpredictability of the market. Though many lost money during those days, overall investors still looked optimistically to the future. "I believe the market will be bullish at least until the end of 2008 Olympics," Wang said. "But in the future I will be more prudent and research more carefully before I buy."
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A client consults with his financial advisor at the Minsheng Banking Corp., Ltd. in Nanjing, Jiangsu Province. CFP
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For those lacking stock savvy, diversified funds can prove to be a practical investment strategy. Compared with stocks, funds in the custody of professional managers typically offer lower risks. Benefiting from the surging stock market, most funds realized great profits in 2006. From December 2006 to January 2007, nearly 120 open-end funds paid out considerable dividends to investors. On January 25, 2007, the Da Cheng Value Growth Fund distributed dividends at a historical high of 14.20 yuan per 10 shares.
After retirement in 2005, Yu Shuzhen invested 20,000 yuan in funds. The net value has since doubled. "At first I deposited all my money in the banks, but earned little due to the low interest rate," she said. "Then I bought governmental bonds for their higher interest rate, but I could not get my money back for five years. Later, some friends suggested that I invest in funds. When I need cash, the fund management companies buy back their funds. Also, I can earn more than investing in term deposits and government bonds."
China has witnessed rapid economic development in recent years, and on average the income of ordinary citizens has risen. Many have reconsidered how best to put their surplus liquid funds to good use. Thanks to ongoing economic reforms, investment instruments - including in foreign exchange markets, futures, and gold - can now be plied by ordinary Chinese citizens.
