Chinese punters in S'pore spooked by stock slump

The Shanghai stock market has declined 40 per cent since mid-June while Shenzhen has dropped 32 per cent.
The Shanghai stock market has declined 40 per cent since mid-June while Shenzhen has dropped 32 per cent.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Some got out early while others burnt in retail-dominant market prone to risks

Chinese nationals in Singapore have been caught up in the sell-off mayhem that has gripped panic- stricken share markets in Shanghai and Shenzhen this week.

The turmoil intensified yesterday, with the Shanghai bourse tumbling a further 5.9 per cent while Shenzhen lost 2.5 per cent.

Shanghai has shed 40 per cent since mid-June while Shenzhen has dropped 32 per cent.

Account executive Mandy Hua is counting her lucky stars that she got out before the meltdown really took hold. Mrs Hua, 32, sold her entire portfolio - a five-figure sum in Singapore dollars - late last month.

"I held stocks in petrochemical, manufacturing and metal industries," she told The Straits Times yesterday. "When the crash first started in mid-June, I thought it was merely a normal correction. But as it got worse, I decided to exit.

IN THE NICK OF TIME

When the crash first started in mid-June, I thought it was merely a normal correction. But as it got worse, I decided to exit... I have friends who lost one-third of their investments.

ACCOUNT EXECUTIVE MANDY HUA, who sold her entire portfolio late last month

"And I did so just in time to make a profit of around 20 per cent - nothing to cheer, considering that I could've earned 100 per cent return if I had sold at the market's peak. But I have friends who lost one- third of their investments."

Financial analyst Liu Ming, 30, who pulled his $100,000 investment from the market on Tuesday, said: "I entered the bull market relatively late - in April this year - and still managed to see a 60 per cent return in just three weeks.

"But even then the signs of bubble risk were getting apparent. So after that I repositioned on banking blue chips, which were still relatively stable in a bearish market due to government support.

"When I exited this week, I was still left with a 40 per cent return. A vast majority of the market players have been hit by losses - I'm glad I was lucky enough to not become one of them."

Retail players like Mrs Hua and Mr Liu make up around 80 per cent of China's equity investors, a dominance that leaves the market vulnerable to mood swings, said BlackRock managing director Michael Fredericks.

"We find that a retail-dominant market like China is one that will chase the momentum both on the upside and the downside. It's prone to herd mentality. We do not advise having exposure to mainland shares for a low-risk income-generating portfolio."

It does not help that certain unique market mechanisms in China - such as the ban on same-day trading - are complicating matters, added Mr Liu.

"Because of that, the market cannot absorb the selldown pressure, which invariably passes down to the next session. That's not conducive for market recovery in the midst of a major drop.

"Our government is fighting a war to save the market and I'm confident that it can win. But conservatively we won't see a recovery for at least another three months. I will not be entering the market now."

Mrs Hua was equally cautious, saying: "I think the market is nearing its bottom, and may be able to find its footing in a month or so. But before that, I think volatility will continue - people will just sell as the government comes in to prop up the market."

A version of this article appeared in the print edition of The Straits Times on July 09, 2015, with the headline 'Chinese punters in S'pore spooked by stock slump'. Print Edition | Subscribe