Market consultant Ying Jianzhong, who played the character of a stock commentator in Blossoms Shanghai, agreed that understanding economic and company fundamentals are indispensable priorities in investing. Confidence among investors, he said, comes from knowing what they buy into.
“In the early days, investors like me had faith in company earnings,” he said in an interview. “We bought bread baked by a listed company we invested in, because we believed that everything we did for the company would help boost its profitability.”
Spurious purchases, driven by excessive speculation, have been the undoing of individual investors in China’s equity market. Some 92 per cent of them lost money in securities trading in 2022, according to a January 2023 survey by state-run broadcaster China Central Television or CCTV.
The hoopla once heightened fears of social disorder. Deng Xiaoping, the late paramount leader and architect of China’s capitalist reforms, soothed the concerns of his comrades, telling them that the market could be closed if the experiment flopped.
Some bold residents got rich overnight from dabbling in the initial batch of eight stocks, which surged by more than 20 times within three years. But wild swings in prices also left many unlucky punters nursing steep losses.
During a market rout in 2015, more than US$5 trillion of value was erased from mid-June to late August. This prompted Beijing to pump about 1.5 trillion yuan in rescue funds to support the market. China’s securities regulator has long been tasked with stabilising the key market indicators, to pre-empt any social unrest.
Blossoms Shanghai re-enacted several scenes from the early days of the market history. There is the rented ballroom in Astor House Hotel on the bund, where the stock exchange’s first trading floor was located. Also featured is the trading counter inside the Industrial and Commercial Bank of China outlet on Xikang Road.
For some of the early stock investors, the scenes are also a rude reminder that years of hard-earned savings could evaporate within minutes of trading.
“Traders at that time were so naive that they believed all the stocks were safe bets, guaranteed to eventually produce handsome returns,” said Jiang Guangyuan, a Shanghai native who has been dabbling in the market since its inception.
“I suffered heavy losses in the 1990s because I was aggressive [in chasing returns], unaware of the risks and basics of the market.”
The latest episode of drama, playing out in real-time before the global audience this week, is a wake-up call for policymakers in Beijing, said Andy Rothman, a strategist at Pennsylvania-based money manager Matthews International.
“Confidence among entrepreneurs and households has been shaken by poorly explained and poorly implemented economic and regulatory policies,” said Rothman, who previously served as a junior US diplomat in China.
“Confidence can be restored if Beijing takes steps that demonstrate it is creating a clear and stable policy environment which supports the private sector.”
This article was first published on SCMP.
