A Market Mood Swing

Tang Weishang is embarrassed to admit that he might have made a mistake. Just over a year ago, the 27-year-old sales executive thought he could make a better living trading stocks listed on the Shanghai bourse full-time. He started investing in 2002 with $33,700, and he says he has done pretty well. So, after convincing his wife that he could make enough money to support them, he quit his job and stayed home every day, trading stocks via the computer in the bedroom of the couple's Shanghai apartment.

Now, says Tang glumly, his wife is "telling me almost every day that maybe it's time to go back to a regular job." These days who could blame her? After a furious 18-month run that saw shares of listed Chinese companies more than triple in value, the country's bull market is stumbling. Indexes in Shanghai and Shenzhen are both down about 15% from their October peaks, and recent moves by the government to cool China's runaway economic growth appear to have deflated the mania for stock investing that has gripped urban Chinese, from maids who quit their jobs to devote their time to trading stocks, to pensioners who plunked their life savings into the markets. Almost daily, myths that were pervasive among neophyte Chinese investors — that what happens to the U.S. economy doesn't matter to China, that the government in Beijing will always prop up the market — get exploded. The giddiness of the bubble is starting to be replaced by pervasive gloom. Fear is getting the better of greed. "This is reality," says Tian Junxiao, a 52-year-old investor who has been day trading for a living for six years. "Younger people are learning that the market can go up as well as down. It's a hard lesson, but it's a necessary one."

Tian had an inkling the tide might be turning on Nov. 5. That's the day he sat in the private trading room that Shanghai Securities, his broker, makes available to their sophisticated clients and awaited the highly anticipated Shanghai-market debut of PetroChina, China's biggest oil-and-gas conglomerate. PetroChina was raising $8.9 billion, the largest initial public stock offering in China ever, and the buzz surrounding the listing was deafening. Tian thought the shares would quickly become overpriced, so he decided not to even try to buy. Indeed, PetroChina shares nearly tripled that first day, pegging the company's market capitalization at more that $1 trillion.

But the excitement didn't last. Since then, PetroChina shares have fallen by about 33%, resulting in significant losses for investors like Zhang Renfeng. A 63-year-old retiree, Zhang thought it was a no-brainer to buy into the big oil company. "All my friends were saying 'buy it,' so I thought, 'How could I lose?'" says the former schoolteacher, who sunk part of her life savings into stocks two years ago and often hangs out at a brokerage office near her home, watching the markets and playing cards with her friends. But her PetroChina play lost more than 12%, and her other investments have also fallen. In mid-November, Zhang gave up, selling all her shares. She says she lost 20% of the $13,500 she had invested. "That's enough," she says. "I won't invest in stocks anymore. I can't afford to lose my savings."