From today’s Washington Post…excerpts that need little setup:
Until recently, it was hard to blame the average Chinese investor for assuming that the stock markets only go up. Since June 2005, the Shanghai composite index has gained about 300 percent. Chen Junjie, 34, who works at a consulting company, used to joke that if the Chinese stock market had a motto, it would be “Even idiots can make money.”
The Chinese stock markets, which are largely closed off to foreigners except for a select group of institutional investors, are dominated by inexperienced individual investors struggling to understand capitalism. They have driven up shares of companies that are known to be corrupt or losing money. Investment strategies in China are far from scientific. Many investors flip stocks after a few days. Stocks with lucky numbers 6 and 8 in their trading symbols are considered good buys. Xu Wenming, who works in importing and exporting, said he invested a lot in the Pudong Development Bank because, he said, “Pudong is a good name.” Pudong refers to the part of Shanghai east of the Pu River. Yu Xueqin, a retired office assistant, invests in companies that produce retail products because government officials are “always saying China is a big populated country and the need for consumer products is big.” In the past, posts on Internet investment boards were mostly tips about how to invest. Now they are filled with desperate tales of caution. A woman, who said she was 48, described how she took $26,000 out of savings bonds without her husband knowing and put it into the stock market, only to lose money. “I am sweaty, shaky, like I’m about to collapse,” she wrote.