The Shanghai Composite started out as a way to capitalize Chinese Businesses, but with all the market manipulation it seems more like it’s turned into a gambling casino in many ways; much like the NYSE, or NASDAQ. It seems that the Chinese People who are really great at saving money have boosted stocks to an unreasonable multiple as many stocks were trading at 80-100 times earnings.
Then when the Global Economic Crisis hit China, many of their companies that were involved in manufacturing and exporting took a huge dive in profits, meaning their stock price based on things like quarterly profits was completely out the window. Many Chinese, just regular small time investors felt it was not fair, as they had put their money into the stock market and watched it rise, only to fall again and give up 20-25% in a very short time period.
But besides all that, I asked one small time investor from China; “Do you realize why stock markets exist?” Interestingly enough, she didn’t really, so I explained the stock markets exist to capitalize businesses. So, if that is what they are for, and if you really want to make money, you should be involved in the capitalizing of businesses, based on simple and sound principles.
Then I recommended to her, as I will to you, to read Warren Buffets essays, and to learn more about investing in the business world. Not long ago, I mentioned all this and the conversation to Guang Wu, the author of a new book; “China: Has the Last Opportunity Passed by!?” and his comments were that stock market investing is indeed much different and new to many Chinese Investors. So, please consider all this.