Fed up Chinese retail investors exit losing markets

Market slide may trigger more withdrawals as small investors complain of inefficient regulation

PUBLISHED : Saturday, 19 April, 2014, 1:09am
UPDATED : Saturday, 19 April, 2014, 1:09am

More than 7 million mainland retail investors have exited the stock market since 2010, with many complaining about inefficient regulations and poor earnings by listed firms. Analysts said big funds would take advantage of the crisis of confidence to "buy low" as some shares were undervalued.

A total of 70.9 million retail investors now hold shares in their brokerage accounts, compared to 78.3 million in 2010, Guangzhou Daily reported yesterday, citing figures by data provider iFind. Mainland individual investors have been seen chasing market rallies rather than finding good bargains when the market is languishing.

"There's no point in playing stocks any more because small investors like us are always the losers" said Shanghai-based retail investor Lin Zhigang. "The regulator only gives empty promises to safeguard our interests and the listed firms are not worth investing in."

The A-share market has been among the world's worst-performing stock markets since 2010 and the Guangzhou newspaper predicted that an increasing number of retail investors would cash out if the downward spiral were to continue.

"Most small investors don't appear to understand the basics of the stock market," said Chen Jinquan, a fund manager with Aegon-Industrial Fund Management. "It's too bad that they have lost patience though there are still good investment opportunities."

The China Securities Regulatory Commission (CSRC) has long been blamed for the weak market as retail investors believed it had the clout to orchestrate a rally with administrative measures. The CSRC would normally suspend or slow down initial public offering approvals to stem fresh equity supply and bolster investor confidence.

Mainland investors are also known for making their investment decisions on the basis of market turnover. They took it for granted that swelling trade volumes are an indication that stock prices would be driven higher by the inflow of fresh funds.

A large portion of the mainland investors are retired workers who bet on the volatility of the market with their savings and are often wrong-footed by sharp gyrations of stock prices.