By Kang Bing (China Daily)
Updated: 2007-12-07 07:02

The other day, I was in a massage parlor near my office for treatment of a stiff neck. I was facedown on the bed, and completely relaxed, when the person giving me the massage broke the silence: "Sir, do you have any idea about today's Shanghai Composite Index?"

I was a little surprised, and then, a conversation about stock exchanges began.

Blue chips, initial public offerings, bull runs and liquidity. One hour later when he finished massaging me and our conversation came to an end, I learned he had bought shares in both the Shanghai and Shenzhen markets and that seven out of the eight blind employees in the parlor are either shareholders or fund investors.

How do they decide what to buy and sell? "Through the radio and from recommendations from people such as you," was his answer.

Although it is more difficult for them to obtain a comprehensive understanding of the share markets, most of the investors seem to have made money.

However, in the past few weeks the market has given cause for concern.

Drawn by the bull runs since May, an average of 4 million Chinese are opening accounts each month.

Statistics show that in the mainland there are now more than 100 million accounts with half being active.

However, few are qualified investors. They do not have any idea how a stock market functions.

Many borrow money to invest and are not prepared for the risks.

Some are so clueless they think it is a lottery and do not investigate the performance of stocks. They buy according to the "lucky" numbers on a stock's code.

Share codes with the numbers "eight" or "six", which means "flourishing" and "smoothness" in Chinese, are very popular.

Millions of investors have rushed to the stock market, lured by the long bull-run. Some have doubled or even tripled their investments, oblivious to the bear in waiting.

The market is like the sea, it has high and low tides. Many investors stand the risk of being washed away.

Despite the authorities' repeated warnings about market risks, some people have mortgaged their homes to dump the money into the stock market. Some have even invested their life savings.

Unfortunately, when the market crashes these are the people that will suffer most.

When millions of people find themselves to be losers, howls of discontent will be heard. Some people will blame the authorities for not providing enough "fresh grass" to attract the bull.

We do not need to state the fact that the stock market in China is still in its infancy and it still has a long way to go to maturity.

Investors should take heed of the warnings from the authorities, and understand they have limited means to control the market.

Can we, and should we, blame our speculative mentality and ignorance?

A mature stock market is characterized by lots of features, and the primary one - wise investors.

E-mail: kangbing@chinadaily.com.cn

(China Daily 12/07/2007 page10)