BEIJING - Mao Yuhui, a Beijing civil servant, did not buy the new Corolla as planned when he got lucky in Beijing's car plate lottery. An incautious man, he put all his money into the Chinese stock market.
"The stock market is so hot, maybe in two weeks I can buy a Camry instead," he said. Mao invested 90,000 yuan ($14,500) and expects to double his money. As of Thursday he was 20,000 yuan to the good.
Mao is one of millions of Chinese investors clinging to a rocketing market. All this week, the Shanghai Composite Index has set new high after new high. From April 7 and April 10, more than 1.68 million new accounts were opened in the A-share market. On April 12, a ban on multiple accounts was lifted, so each investor can now have up to 20 accounts.
The number of investors exceeded the capacity of the market data system. China Securities Depository and Clearing Corp Ltd reported delays in processing digital certificates on Tuesday, and many new investors, desperate to join the feeding frenzy, failed to have their accounts approved.
Chinese stock market started rising rapidly in 2014 when it grew by 50 percent -- the fastest growth in Asia. This year has been no different with Shanghai climbing by over 25 percent so far and Shenzhen by about half as much.
The madness comes as quite a surprise, and a worry. China's GDP growth in the first quarter was a mere 7 percent, down from 7.3 percent in last year's fourth quarater. A stock market rising so precipitously against such an economic background should set alarm bells ringing. There is much talk of bubbles and risk.
Xiao Gang, chairman of the China Securities Regulatory Commission, warned on Thursday that new investors who lack experience of market turbulence should stay calm, and fully evaluate the risks of investment. "Don't follow blindly like sheep," he advised.
Stock market veteran Zhao Shucheng has bitter memories, shared by many investors, of 2007 and 2008 when the Shanghai Composite Index crashed from 6120 to 1665. Zhao lost about 200,000 yuan.
"We had a joke about the stock market at that time: you drive in with a Mercedes-Benz and walk out with nothing," Zhao said as he watched a screen in a stock trading hall in Beijing's Xicheng district. Unlike Mao Yuhui, he only invests one third of his money and is ready to sell at any time.