SHANGHAI – SEVENTY-YEAR-OLD retiree Chen Dafu had to take a job as a parking attendant at a Shanghai hotel to make ends meet after the stock market wiped out half his life savings last year.
But his fortunes are changing with the Shanghai market, which has swung from one of the world’s worst performing bourses last year to this year’s best.
Chen prays it continues so he can recover his lost 40,000 yuan (S$8,870), cash his chips and walk away.
‘I’m still trapped, but I have got 20,000 yuan back since the start of this year,’ he said outside a bustling Shanghai brokerage hall this week.
‘I hope the rally continues until the end of the next month, so that I can get most of my losses back.’ While markets are stumbling around the globe, the Shanghai Composite Index has shot up more than 34 per cent this year, after losing 65.5 per cent of its value last year.
So do Shanghai investors know something that their counterparts in Tokyo, London and New York are missing? Apparently not, is the consensus among most experts, who say the share prices reflect neither the fundamentals of listed companies, nor the overall economy.
‘That’s the Chinese stock market, it’s not driven by market forces at all,’ said Sherman Chan, a China economist for Moody’s Economy.com.
The market is buoyed by investors’ optimism the government will steer the economy out of the financial crisis, or a least pump cash into it and improve conditions for the bourse’s state-controlled giants, Ms Chan and others agree.
‘It is primarily driven by sentiment, that is why we see such wild fluctuations,’ she said. ‘When it was good times, we saw the best performance in China, when things turned we saw the worst performance.’ London’s Financial Times newspaper was harsher in a recent analysis, calling Shanghai ‘a mockery of a market’.
Investors often bet on what Beijing’s next policy might be, over companies’ balance sheets, experts say. China’s strict controls on the flow of money and investments mean its citizens seeking to invest in equities have no option but Shanghai and the smaller Shenzhen exchanges. At the same time, the rules keep out all but a very few foreigners.
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