Monday, July 27, 2015

• Stock Downturn Hits Chinese Investors in the Heart, Not Just the Wallet - By JAVIER C. HERNÁNDEZ

HONG KONG — Farmers turned village community centers into makeshift trading floors.
Young workers quit low-paying jobs to play the market full time. Retirees started investment clubs, counseling one another on stock picks.
 

Stock investors playing cards at a brokerage 
house in Beijing.

HONG KONG — Farmers turned village community centers into makeshift trading floors.
Young workers quit low-paying jobs to play the market full time. 
 
Retirees started investment clubs, counseling one another on stock picks.
 
China fell under the spell of the stock market over the last year, as millions of factory owners, university students, wheat growers and other investors jumped at a chance to strike it rich.
 
“When we eat breakfast, we think of the stock market. When we sleep, we see flashing red and green screens,” said Elizabeth Xu, 37, a customer service supervisor at an electronics company in Shanghai, who invested $2,500 last fall. 
 
“This is our new sport.”
But with the market stumbling in recent weeks, investors are now engaged in a national game where the risks are increasingly outweighing the rewards.
 
That reality has prompted reflection among some traders, and it has touched off a wider debate about wealth in a society caught between the proud egalitarianism of its socialist past and the lure of capitalist riches. 
 
Some Chinese citizens have taken to social media to question the amount of attention devoted to the market and to criticize what they describe as an unhealthy materialist tendency in society.
 

Placing orders at a brokerage house in Beijing. The bull market's reversal has led to reflection about 
greed in Chinese society.

“The stock market is all about filling your pockets,” said Zhou Lian, 32, a visual artist in Beijing who wrote a critical post on WeChat, a popular mobile messaging application.
“Is that what we want to stand for?”
 
A recent opinion article in China Daily, a state-run newspaper, warned, “It is dangerous to play with greed.”
Cheered on by relatives, co-workers and rapturous headlines in the state-run news media, ordinary investors in China helped stoke a remarkable rally over the last year. 
 
With easy access to loans for trading, individual investors opened more than 38 million stock accounts in the second quarter, compared with nine million in all of 2014.
The lure of the stock market reflects broader cultural influences. 
 
Many people in China prize financial prudence, and the savings rate is among the highest in the world.
But many Chinese also believe passionately in the power of luck, and China has a long history of high-stakes betting.
Gambling is widespread and often considered a social activity; mah-jongg games are common on street corners, and the lottery is a popular pursuit.
 
The intense interest in the stock market, in some ways, grew out of those habits. 
 
Many investors entered the market with lofty dreams — finally, they would have the money for an exotic vacation, an engagement ring or a new home.
 
Amateur traders turned to numerology, long a fixture of Chinese culture, to pick the best investments. Some purchased prayer beads made especially for investors, hoping to conjure good luck.
 
In Shaanxi Province in northern China, rural workers wishing for an early retirement began investing after seeing chatter on social media sites about the “mad cow market,” as it is sometimes called. 
 
They were encouraged by reports this spring in The People’s Daily, the flagship paper of the Communist Party, which trumpeted the seemingly never-ending bull market.
In Nanliu, a small town in Shaanxi, workers set up computers so that they could track stock purchases. 
 
“Everyone wants a chance to improve their lives, even if they only get a little piece of meat,” said Zhang Li, a longtime resident who invested several hundred dollars.
 
But greed has long been viewed as a particularly dangerous quality in Chinese culture.
 
The ancient scholar Xunzi, in describing the bad nature of human beings, cited a love of profit as his first piece of evidence, noting its ability to cause chaos and a lack of cooperation. 
 
Mencius, another ancient Chinese philosopher, warned against acquiring showy material possessions.
 

Investors playing cards at a brokerage house in Beijing. Some brokerage houses function as gathering 
places where investors can cheer on stocks together.

The early Confucian view, said David Wong, professor of philosophy at Duke University, was that “income, wealth, material possessions and social prestige are necessary only up to the point where they enable one to pursue goods that are of much greater value.”
 
“The human tendency to lose focus on that priority,” Mr. Wong said, “is perhaps the primary cause of our loss of connection to and care for each other.”
 
The financial pain for Chinese households has not been pervasive, since stocks are still not broadly held by families.
The major indexes, too, have recovered somewhat in recent days, after the governmentaggressively moved to prop up stocks.
 
But the recent volatility has unsettled investors as they grapple with not only the financial toll but also a loss of the day-to-day emotional rush that underpinned the trading culture.
 
In some areas, retirees have made a habit of watching the market’s movements together, finding solace in collective cursing and celebration. 
 
At a brokerage house in downtown Beijing last week, retirees gathered before large stock boards, playing cards and assessing how much money they had lost in recent weeks.
One man said he was down about $10,000.
“We’ve all lost money,” he said, growing irritated.
“Everybody’s pretty much the same.”
 
At another brokerage house, a 70-year-old man who gave only his surname, Wei, said he had lost about $30,000.
“My wife blamed me, but is it of any use?” he said.
“This is money we could have left to our son. But what else can I do? The damage is done.”
 
Mr. Wei had been investing in the market since 2008 but said he was devastated by the recent losses.
“I have lots of anger inside me,” he added.
“It’s just never easy for us ordinary people to make money.”
Despite the volatility, Lu Wenjie, an analyst at UBS in China, said that many investors were likely to stay in the market.
 

Investors placing orders in booths at a brokerage 
house in Beijing.

“They are kind of stuck,” he said.
“They are reluctant to record losses, and some of them will even try to add money in the coming weeks and bet on a rally.”
 
The turbulence has rattled some traders, especially those unaccustomed to the ups and downs of the market.
In China, some doctors have taken to calling it stock market anxiety syndrome.
 
Academics have warned about the psychological effects of fluctuations in share prices.
A study by Taiwanese researchers last year found that falling stock prices correlated with increased hospitalizations for mental health disorders. 
 
When a stock index fell for five consecutive days, for instance, hospitalizations increased by 1.6 percent.
Yan Zhengwei, a Shanghai psychologist, said he had recently seen several patients who told him they were depressed by the market, including a client who lost more than $1.6 million.
 
“They say they are fine, but they’re just saying it,” Mr. Yan said.
“It’s a lot of money, after all.”
But Mr. Yan said there was a silver lining.
Counseling sessions for couples had recently turned remarkably civil, he said, as husbands and wives found a common enemy in the market.
 
“When a major blow came, they actually stopped blaming each other and both blamed the market,” he said.
“It’s like they had both become victims.”
Xue Wei, chief psychologist at Linzi Counseling Center in Shanghai, said the popularity of the stock market reflected a deeper insecurity in society. 
 
He said that Chinese people were accustomed to having a fixed social status under the Communist system.
Now, he said, many people are looking to the stock market to define their worth.
 
“They are very insecure inside,” he said.
“They think if they can achieve financial stability in a short period of time, they will feel more secure.”
For some investors, the round-the-clock trading has placed a strain on relationships.
 
At the height of the downturn this month, Wang Xiaoming, a 23-year-old bank attendant, had a dilemma: celebrate his girlfriend’s birthday or try to salvage his portfolio?
Mr. Wang, who had invested $2,000, about a fifth of his savings, chose the portfolio.
His girlfriend quickly scolded him for “only having numbers on my mind,” he said. 
 
After that, he promised to spend less time checking stock market chat forums. (He currently belongs to six.)
“It’s hard to find the right balance,” Mr. Wang said.
Still, Mr. Wang said he thought it was important to gain experience in the market.
He began to elaborate on his idea but abruptly excused himself. 
 
It was a quarter past nine, he explained, and the markets were opening.