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KAI RYSSDAL: Chinese investors kept pace with the drama on Wall Street this week. The benchmark Shanghai Composite wrapped up trading off about a percent or so.
Our correspondent in China’s financial capital, Scott Tong, has been trying to figure out a way to tell the story of Chinese investors. There are more than 100 million of them, four times the number there were last year. Another 300,000 open up brokerage accounts every day. And as Scott found out, at least one of them was much closer to home than he had imagined.
SCOTT TONG: We call her “Ayi”— that’s Chinese for Auntie.
Ayi is a 42-year-old migrant from a village five hours away. She babysits, cleans, whatever we ask — all for a buck twenty five an hour. And that’s the rip-off-the-foreigners price.
Our Ayi works really hard, but she doesn’t say much, so I’m dying to know what she’s thinking. Now I know . . . the stock market.
Yesterday at the playground she and her sister were discussing the latest machinations of the Shanghai stock exchange. It’s tripled since 2005.
AYI AND SISTER [interpreter]: Two years ago we started thinking about investing in stocks, putting in $8,000. Everyone talks about it — at the market, at the playground. One friend made 10 times his salary playing the market, so he quit his job to play stocks.
Welcome to market mania. The cliche here is when the ayis start opening brokerage accounts, it’s a sure sign of a bubble. A New Yorker here told me it feels like when the Powerball jackpot back home hits $50 million. It’s all anyone can talk about.
This is China’s version of the dot-com frenzy.
Ping Zhou: The greediness should be the same. Because they want to take a risk. They think they can make quick money.
That’s Ping Zhou of G.E. Asset Management.
ping Zhou: The newer retail investors they don’t understand financial markets. And they don’t understand the risk. So they put their money in and they think they can make money because they are gambling.
One gambler doctored the lyrics to this trendy love ballad — it’s a regular on the karaoke scene here. Instead of the original “I’ll love you until I die,” the new version goes “I will buy and hold until I die.”
Now, it’s all fun and games and song while the party lasts. The problem is, a lot of the housekeepers and ayis showed up late to this party. Just in time for the market to tank 21 percent.
You can feel a lot of the pain at this local retail brokerage firm. Folks here — some are in pajamas and slippers — are crowding around trading screens. They’re trying to sell and get out.
Retail investors account for a lot of the volatility in the Chinese stock market. They own 60 percent of the shares, but they make 90 percent of the trades. One of those traders is this ayi — she’s the cleaning woman for the brokerage firm.
AYI [interpreter]: I just opened an account last Sunday. I never invested before. So I put in $2,500. And already I’m down 10 percent.
She’s an example of what the pros unkindly call “the last suckers in.” She bought at the top — it’s one of many rookie investor mistakes that are now coming to light.
And here’s another: This retired farmer invested money that she couldn’t afford to lose.
Woman: We’re all laid off from state-owned companies. Folks like us in our 40s and 50s can’t find any work these days. Last month I started investing in the market and lost $1,500 my son needs for college.
There’s a lot of anger here — folks blaming the regulators who just raised a stock trading tax to cool down the market. Again, asset manager Ping Zhou.
Ping Zhou: If they lose money, they will blame the government. Because they don’t understand the government should have some measures to squeeze out the bubble in the market.
In the end, he thinks the latest tumble is good. It’s brought a measure of sanity for the new retail investors — the taxi drivers, the ayis.
As for our nanny, she’s opted to sit on the sidelines for now.
She thinks it’s too much of a risk for her hard-earned money. But someday, the market will zoom up again, and again she’ll be tempted to quit this gig and become a day-trader.
In Shanghai I’m Scott Tong for Marketplace.
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