Rollercoaster ride leaves Shanghai investors flat

By Albee Zhang ,AFP

SHANGHAI — Chinese stocks ended 2015 slightly higher despite a wild ride that saw trillions wiped off market capitalizations in a summer rout that shook global markets and prompted an unprecedented government rescue package. From Jan. 1 to mid-June the Shanghai market — which had already surged by more than 50 percent in 2014 — leaped by 60 percent again. Then it slumped nearly a third in three weeks, before slowly recovering. After all the gyrations of the most volatile year in the quarter-century history of the modern Chinese stock market, the Shanghai Composite Index closed at 3,539.18 on Thursday, up 9.4 percent for the year. “It was the year of the ‘monkey market’ for Chinese stocks — jumping up and down like a monkey,” said Professor Oliver Rui of the China Europe International Business School.

But a small profit will have seemed like a bonus to investors during the depths of the summer turmoil, which prompted an extraordinary government bail-out. Beijing spent as much as US$230 billion buying shares to support the market, according to an estimate by investment bank Goldman Sachs. Early in 2015, the government had urged exchanges yet higher with the People’s Daily newspaper, the mouthpiece of the ruling Communist Party, saying: “The 4,000-point level is merely the beginning of the bull market.” Looser controls over margin trading — investors using borrowed funds to trade stocks with only a small portion of money put down as deposit — also fueled the bubble, and its subsequent burst after regulators cracked down on the practice. “Everyone took the rollercoaster ride, but in the end the market is still where it began,” said Phillip Securities analyst Chen Xingyu.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, performed far better for the year as investors chased smaller company shares in the face of Shanghai’s weak performance. It surged 63.2 percent for the year, making it one of the world’s top performing markets.