(Updates with closing share prices throughout.)
June 6 (Bloomberg) -- Carrie Pan, a 29-year-old Shanghai accountant who's lost almost half the value of her portfolio since she began investing in Chinese stocks, is confident again.
She purchased 1,000 shares of Yang Quan Coal Industry Group Co. in April to add to her 200,000 yuan ($31,400) in equity holdings, which fell 40 percent last year and compounded her losses since she started buying stocks six years ago. So far, her latest pick had been up about 4 percent through yesterday.
"I believe stocks will rise," said Pan, watching her holdings on a computer screen in her two-bedroom apartment and sipping a mouthful of bottled Ice Dew spring water on a recent afternoon of maternity leave. "Guo has already done lots of things to support the stock market since he took office, and he is very keen on improving the market's performance."
That would be Guo Shuqing, the 56-year-old head of the China Securities Regulatory Commission, who took over seven months ago pledging reforms. Since then, Guo has taken action to increase the amount of stocks foreign investors can buy in the otherwise-closed market, urged listed companies to pay more cash dividends to shareholders and made changes in how initial public offerings are priced.
"Our current stage of work is focused on improving the fair play of the market, protecting investors' legal rights and enhancing the ability of serving the real economy," Guo said in a People's Daily report posted on the securities regulator's website in March. "We'll bring more market forces to gauge to- be-listed companies, reveal their potential risks and let more investors oversee pricing."
The CSRC and the country's two exchanges, in Shanghai and Shenzhen, have also announced plans to cut transaction costs for stock purchases and sales, and tightened accounting scrutiny on companies that are facing delisting.
Restoring Trust
The goal is to restore the vanished trust of a Chinese public that has taken a walloping in stocks and instead sought investment alternatives such as bubble-prone real estate and the world of underground lending, known as shadow banking, where risky and unregulated investments promise investors annual returns of as much as 100 percent.
"Guo is the man," said Hao Hong, chief China strategist at BoCom International Holdings Co. in Hong Kong. "It's a show of determination. It's all about confidence building."
Like Pan, millions of Chinese investors watched their stock investments crash and remain mired in a two-year bear market. The benchmark Shanghai Composite Index, after peaking at 6,092 in 2007 following a bull market, fell to just above 1,700 by the end of 2008. Four trillion yuan of government stimulus lifted the index to 3,471 in 2009. Yet the market fell another 33 percent in 2010 through 2011, dragging valuations to a record low of 8.9 times estimated profit in January.
Losing Their Shirts
The Shanghai index is up 5 percent in 2012, though it has fallen 6.1 percent from this year's high on March 2 amid concern an economic slowdown is deepening. The gauge dropped 0.1 percent to 2,309.56 today.
China's 50 million individual investors lost an average of 40,000 yuan last year, according to a May 9 People's Daily report. That's almost twice the annual average disposable income of an urban Chinese. Those returns, exacerbated by IPO prices that tanked immediately after listing, companies' reluctance to pay dividends, and speculative bets on smaller companies' back- door listings, contributed to equity flight.
Insider trading probes have also kept some investors away. The securities regulator handled 39 such cases in the first 11 months of last year, the CSRC said in a November statement. That's compared with 42 in the first 10 months of 2010, it said. The focus on market oversight is still to prevent and crack down on insider trading, Guo said at a December forum in the southern city of Shenzhen.
Seeing Hope Again
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