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Investors grow timid about 2009 market

By Zhou Yan (China Daily)
Updated: 2009-01-02 10:17

A man calculates his investment returns at a broker's trading hall in Haikou, south China's Hainan province, Dec 31, 2008. Some investors are more pessimistic after the market carnage in 2008, and are considering shifting their portfolios toward safer investments. [Asianewsphoto]

Thrifty Shang Youjuan was still caught in the euphoria of 2007's bull market when she took bold steps to invest most of her life savings into the Chinese stock market in January 2008.

But like countless investors in the country, the 56-year-old retiree has seen over 60 percent of her hard-earned 320,000 yuan ($46,900) evaporate in the unexpected market mayhem now taking place.

"I've been tortured for an entire year, and am glad that the wretched 2008 finally ended," Shang said.

She ventured into the stock market in 1993 with 3,000 yuan. That year, urban per capita annual income was only 2,337 yuan.

Her appetite for more investment returned and started swelling when the value of the money she put into the market doubled in 2007.

Unfortunately, her dreams were shattered, after tumbling through the turbulence in the stock market and one of the biggest overall falls ever seen in the history.

The leading indicator plummeted 72 percent from an all-time high of 6,124 points in October 2007 to a low of 1,664 points a year later.

The market value shrank from 32.76 trillion yuan on Jan 2 to 9.7 trillion yuan by the end of the year, making it one of the worst performers in the global market meltdown.

As for the new year just begun, industry experts and investors hold diverse opinions.

"We forecast the leading indicator will hover between 1,650 points to 2,700 points, given the growth rate of corporate profit will be likely to fall to negative 10 percent," said Wu Feng, an analyst with TX Investment Consulting.

"The recovery may come in the second half next year," Wu said. He suggested that policy-driven stocks like energy and 3G sectors will see sustainable gains.

"In our view, markets with economies showing greater resilience are likely to fare better. In this regard, we have a preference for China and are overweight on both the A-shares and H-shares," said Lorraine Tan, director of equity research, Asia, at Standard & Poor's.

However, some individual investors are more pessimistic after the market carnage in 2008, and are considering shifting their portfolios toward safer investments.

"I will liquidate my account when the index climbs to 2,500 points, as nobody knows when the financial woes will end. And will invest more into some other products with low risks, like gold and bonds," said Gong Zhou, a 32-year-old advertiser in Shanghai.

Gong made up his mind because over 70 percent of the 250,000 yuan he had in stocks shrunk in value.

He said he'd believed in the prediction of some renowned economists in 2007, who said the Chinese stock market would rise to 8,000 points or higher in 2008.

The benchmark Shanghai Composite Index edged down for the eighth straight trading day on Dec 31, 2008 to fall 0.66 percent, closing at 1820.81 and marking the end of the turbulent year.

The valuation of A-shares had been trimmed to 14.77 times earnings per share yesterday from as high as 49.84 times in 2008.

The stock market performance has left the average investor stunned.

"The drastic correction in Chinese stock market has reflected a grim economic outlook, under which corporate earnings are expected to shrink further due to slumping demands and exacerbating external economic conditions," said Mao Nan, an analyst with Shanghai-based Orient Securities.