FANG TAO’S hopes of striking it rich in the domestic stock market died as his investments plunged by half over the past year. Now, he’ll be happy just breaking even.

    The 28-year-old employee of a clothing firm in Shanghai has pared his allocation to equities by as much as 15 percent since peaked last June. He sees no sign of the Shanghai Composite Index returning to its highs anytime soon, despite efforts by regulators to prop up the market.

    “The most significant change has been my mindset,” Fang said. “Now I feel like when I’m not making a loss, I’m winning.”

    The crash that erased US$5 trillion from stocks in 2015 has had a sobering effect on the nation’s 106 million individual investors, many of whom piled into shares just as prices peaked a year ago.

    While realistic return expectations should improve the health of China’s notoriously speculative markets, there is a downside: Companies may find it harder to raise the equity financing needed to wean themselves off a record reliance on debt.

    “People realized that it can’t go up forever after the crash,” said Steve Wang, chief China economist at Reorient Financial Markets Ltd. in Hong Kong. Creating a strong market for equity financing “is a challenge for the government,” he said. “IPO activities and direct financing through the equity market have been reduced.”

    The influence of mom-and-pop investors is bigger in China than nearly every other major market. Individuals drive more than 80 percent of trading on bourses in Shanghai and Shenzhen, versus about 15 percent in the United States.

    China’s bubble began inflating in late 2014. As the buzz around shares grew, investors opened new trading accounts at a record pace and took on unprecedented amounts of margin debt.

    When the reckoning came, it was swift. The Shanghai Composite Index crashed more than 30 percent in the first month, before eventually losing as much as 49 percent.

    The turmoil roiled shares across the globe, with Federal Reserve Chair Janet Yellen citing China’s volatile markets as a reason to keep benchmark interest rates on hold in September.

    Wu Yuetian, who lives in Hangzhou and works in Internet finance, has 40,000 yuan trapped in stocks that remain suspended. These days, his spare cash goes to local wealth management products, which offer yields of 8 percent to 10 percent.

    “I will be cautious and just stay on the sidelines,” Wu said.

    Not all Chinese investors are cutting back on speculative trading, with many shifting to the property and commodities markets instead.

    New home values in Shenzhen have jumped 62 percent in the past year amid a real estate boom in China’s biggest cities, while prices for everything from iron ore to steel and eggs surged on the nation’s futures exchanges earlier this year, before reversing at the end of April.

    The volatility in commodities suggests China’s individual investors still have a lot to learn, but the hope is that their casino-like mentality will fade over time, Wang said. (SD-Agencies)

    Stocks tumble

    CHINA’S stocks slumped yesterday as weak investment data fuelled worries about the health of the Chinese economy and as global equity markets fell on fears that Britain may vote to leave the European Union.

    The worries offset lingering optimism that MSCI may decide this week to add Chinese shares to its emerging market index.

    Posting their biggest fall in nearly four months, the blue-chip CSI300 index slumped 3.1 percent to 3,066.34 points, while the Shanghai Composite Index tumbled 3.2 percent to 2,832.51 points.

    Investor sentiment was also fragile ahead of the first anniversary of June 2015’s near-meltdown in China’s stock markets. (SD-Agencies)