"I Don't Have Faith Anymore": Frustrated Chinese Shun Stocks For Safety Of Dollars, Gold
Back in March of last year we noted, with some incredulity, that some 30% of China’s newly-minted day traders had an elementary education or less. Even more incredible, we learned that nearly 6% of the country’s new “investor” class were illiterate.
Just days after we made that startling revelation we gave readers an idea of just how many Chinese were opening new stock trading accounts each month. In March for instance, Chinese farmers, housewives, and all manner of other amatuer traders opened enough brokerage accounts for every man woman and chile in Los Angeles.
But it gets worse. Not only were millions of semi-literate Chinese starting to trade without being able to read let alone conduct fundamental analysis, they were buying into a market gone parabolic:
Worse still, they were buying on margin - heavily:
By summer, the stage was set for a truly epic meltdown on the SHCOMP and especially on the tech-heavy Shenzhen.
Sure enough, in June, the wheels started to come off.
As we warned when the plunge began, China was facing more than a stock market selloff. Beijing had managed to give legions of day trading Chinese the idea that stocks always went up. That encouraged many people to plow their life savings into the market on margin. When the unwind began - starting with the half dozen or so backdoor margin lending channels that helped to pump an extra CNY1.5 trillion into stocks - many Chinese were confronted with the possibility that they may lose everything.
Take the case of Yang Cheng for instance, who, having piled his life savings (plus his relatives' money) into the market thanks to encouragement from his broker, borrowed $1 million in margin and bet it all on one stock - a local mining company. When the trade blew up, he lost it all. "I don't know what to do. I trusted the government too much. I won't touch stocks again, I have ruined everyone in my family," he lamented.
In short, China faced the prospect that the meltdown could trigger social unrest, which partly explains why Beijing scrambled to funnel nearly CNY2 trillion propping up the market. The story of the Chinese retail investor became so ubiquitous that Western media started what at times felt like a contest to see who could capture the most amusing pictures of distraught Chinese day traders.
Now, having watched their money disappear into the Beijing smog, many Chinese are bitter and say they have given up on the stock market forever.
"Unlike Western markets where institutional investors dominate, individuals account for 80 percent of transactions on Chinese exchanges [and] nearly 100 million people have trading accounts," Reuters wrote on Thursday. "Their enthusiasm for stocks drove China's main indexes to record highs in the first half of 2015, but after enduring a summer bust that saw prices plunge around 40 percent, the January sell-off has been the final straw for many."
Many, like 22-year old Zhou Junan who says he "had planned to sell when indexes got a little bit higher," but missed the top. "I don't have faith in the stock market any more. I think it's better to buy dollars," he says, underscoring the extent to which everyday Chinese are rushing to exchange RMB for USD in the new year.
Reuters also quotes a 48-year old bank accountant from Kunshan who recently bought 500,000 yuan ($76,000) worth of U.S. currency. The Chinese stock market is "a mess," she says. "Dollar is far less risky."
Now you're beginning to see why the likes of ICBC are running out of physical dollars.
But it's not just greenbacks Chinese are turning to. They also like gold. "Except for gold, all other assets are just bubbles to me," one 24-year-old female investor in Beijing said. "I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal."
Unfortunately it's out of the proverbial frying pan and into the fire for many Chinese though, as it seems that the allure of high yielding assets is just too much for the uninformed masses. "A number of retail investors were also switching money out of stocks and into wealth management products (WMPs) and principal-protected funds," Reuters adds.
"I have bought different kinds of WMPs from banks. The majority of them are backed by bonds, which are less risky," said a 50-year-old woman surnamed Wang, from Guangzhou, who said she lost 30 percent of her stock market investment in the summer meltdown before selling out in August.
That, as we've shown, is not necessarily the case. In many cases, investors have no idea what "assets" are backing the WMPs. Additionally, investors are often unaware that the products suffer from duration mismatch, meaning that if the paper stops rolling, the music stops until the underlying assets can be liquidated. Perhaps Ms. Wang should ask some investors in Fanya Metals' WMPs what can happen in a pinch.
In any event, the message is clear: the disaffection with stocks in China is rampant which means every rip will be sold as the retail investors which comprise more than three quarters of the market scramble to salvage what's left of their money. Once they've cashed out of equities they'll promptly exchange their yuan for dollars as the capital flight which China so desperately needs to contain continues unabated.
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Smells like propaganda to prop up the dying Dollar, comatose from the Curse >>> http://wp.me/p4OZ4v-3z
3 of the 4 disgrntled investors mentioned in the article are women. You know that women are moody and unpredictable. This SHCOMP is just gyrating like a woman on their menstrual cycle.
I'm not sure you're using a good example. Since the market is about to make that "Earth-shattering Kaboom" noise and (according to you) their vaginas are telling them to get the fuck out of there before it happens, that seems to indicate that their emotional reaction is more valid than some grimy dude's intellectual firepower who wants to stay and see the pole dance to its final curtain call.
Hey Jurgster go sell you biblicism institute thrash elsewhere!
High demand for gold. No wonder the price keeps falling...
Oh, wait...
Just a note from my recent time in China. Retail price of gold is 6% above spot. I don't think it matters how much you buy. 10g bars are popular. About 1/3rd oz.
Where can I buy Pandas (the gold ones) inside mainland China? IBIC? Bank of China?
There are coin stores which deal with gold and silver pandas (and other commemoratives). The gold price is ok, the silver price is really, really high, at least in Zhengzhou.
tarabel I totally agree this article aims to align itself with the idea that precious metal are a safer store of wealth than equities at the present time. However it infers that the illiterate population making poor investment decisions are now moving to precious metals. I don't see how their actions imply good sense if they are being discounted as the illiterate amasses. Wha?
tarabel: I love you, man.
People still buy stocks?
But it's not just greenbacks Chinese are turning to. They also like gold. "Except for gold, all other assets are just bubbles to me," one 24-year-old female investor in Beijing said. "I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal."
It's going to become patently clear to the world soon that all paper is just one big ponzi.
"It's going to become patently clear to the world soon that all paper is just one big ponzi."
I say this every year, but nada, the farce keeps marching on. Self delusion is a powerful thing. I think the emperor could be dick slapping most people at this point and they would still swear he was fully clothed (and a sharp dresser at that).
Daddy Market slappeth and taketh away.....
Get out of the Casino folks!
Run! The House always wins!
"Unpatriotic bastards! We'll create a law forcing you to buy this nations stawks!" - Vice Public Security Minister Meng Qingfeng
It's for your own good ;-)
Seems a little agitated to me...
In the East, faith in dollars is the last erroroneous faith. In the West, faith in a binder of lies falsely advertised as the teachings of Jesus is the last erroneous faith.
Oh here we go, when the communist-cronyism going gets really REALLY tough, go straight after the Guy that overturned the money changers tables at the Temple.
Well done Comrade!...lol.
Things have gotten so much better since the secular humanists started running things around here. And there. And, well, everywhere.
So thanks for doing that thing you do, Vern.
You're pretty funny.
Men are attracted to smart Women.
"Men are attracted to smart Women"
+10
Don't worry about Wang- she bought property on the GOOD side of the wall.....
No Mas .Com offers?
The Cubans and Puerto Ricans are scooping up $usd denominated debt.
Belgium of the Bahamas Bitchez
GOLD Bitchez
They fleeced some folks.
In China only a small percent of the population is in the stock market. What happens to them is of little consequence.
exactly. the price of pigs is hugely more important. the secret weapon of the zionazis should be something that will cause a massive pig holocaust and china would collapse in weeks.
The Zionazis are too kosher to deal with pigs. Lucky for me. I live in China and pork is my favorite vegetable.
Sorry. I can't help it. WMP is just too close to the word "wampum."
And probably worth just as much.
first. i didn't know you needed all that stuff to trade. you used to need that in the old days when company data was important but now all you need is a 6th grade education to cover adding and subtracting, multiplication and division, a good set of eyes and quick fingers.
so the dumb chinese buy dollars and the smart chinese buy gold.
Chinese joke:
What's the best way to hide money from your wife?
Buy stocks, there won't be any left for her to find, in no time.
Stereotype or not, many Asians are known to enjoy and excell at professional gambling. They will figure the game out quickly. Then again there are millions suckers born every minute in Asia just based on their population size.
I wouldn't be surprised if they are the ones that break the gold fraud.
Most people who gamble are degenerates, no matter what race.
I didn't junk you but it's hard to take your comments seriously when you have your junk in my face. I didn't want to get to know you that well this early.
I saw something the other day that made me think of your banana hammock and a comment you made. You were right about that fuel thing, I saw where during the invasion of Iraq diesel was only about 15% of the fuel usage.
Nobody excels at gambling. It is all chance, and the house has the odds. Gamblers are losers.Casinos like to perpetrate the myth of the skillful gambler because it brings in the suckers.
The Chinese sure love to gamble, I remember returning to Hong Kong from Macau on a high speed ferry carrying some very angry Chinese who had just lost a lot of money gambling in Macau, the biggest gambling center on the planet
Same "middle of the night" selling of US equities. I'm staying up to watch London parlay European equities, then sell off anything of value to ramp US equities after the European markets close.
Head on a swivel Bitchez. I'm tracking these clowns down. I'm thinking M/E shenanigans
camel Jockeys looking for yield
What do you do when you cash in your chips anyway? PMs? fiat? or do you keep it in the casino?
I love how they're "semi-literate" when they buy stocks but they're somehow transformed into wise eastern gurus when they buy gold.
It's a process of enlightenment. ( ;
Gold is easy to understand and doesn't have fraudulent financial statements backing it. You don't have to be educated to know the price of gold. Then again, it's been a bunch of pavlovs buying the FANGs
Gold is even more fake, given what has taken place it should be about a million dollars an ounce, but it ain't.
It is called a "Learning Curve". China is new to investing, investment products and the ups and downs of markets. Chinese also have this weird, near religious faith in government guidance. It is probably a relic of Communist indoctrination. On the flip side they are less compliant than the average American.
"Dorrar is far ress lisky."
ROR
Wait for noobs to cry a little more then buy something. SHCOMP at a good level.
I see HNS, but if the level fails to break down, then it can be really bullish.
http://i.imgur.com/5ay7OW2.png
The Chinsese have a different tradition than the West when it comes to gambling. Back ye old days and example was a guy in Hong Kong g0t a pretty good win on a lottery ticket. He didn't go out and blow it on wine aand women. He purchased a plastic injection molding machine and got contracts from manufacturers. He put his extended family to work. They trimmed flash, loaded the plstic pellets, re-cycled scrap, and etc. When you make a killing you are supposed to help family. He helped both himself and his family.
If I was the Chinsese government I'd be real careful about pissing off the Chinese women. There is a tradition of driving needles into ears and long nails into the heads of husbands and lovers.
I don't see retail investors running from China market.
I saw people who had access to easy credit borrow and play in China market with leveraged funds.
I see them now, running, after waiting for a while for China Government to step in to protect them from the Plunge.
The Chinese who bought shares with hard earned money is not going to sell their assets below the price they bought the asset.
They will wait for decades before giving up. That's Chinese mentality. Quite similar to Indians in that respect.
Come to think of it, whole world is like that. except those who have margin call coming knocking on their doors.
Should never play with Other people money me think.
Bitcoin crashing faster than oil...
gold should soon follow
Looks like people are "cashing out" of bitcoin.
However gold and silver have gotten a little boost the last couple hours.
Reality is that the Chinese people want US dollars, and that's why the banks in China ran out of US cash.