Prudence urged amid stock market enthusiasm

The early spring chill over the weekend did not dispel the hundreds of individual investors standing along downtown Shanghai's Guangdong Road, a gathering place for three decades for stockholders eager to discuss the performance of A shares and seek out tips to better their portfolios.

The spot began winning fame among shareholders as an informal place to share thoughts on the securities market in the early 1990s. Most are individual investors aged above 50. They form small groups each afternoon on trading days, and the throngs grow even bigger on weekends when investors have had a chance to digest the trading week's developments.

Regular visitors to the spot say they hope to follow in the footsteps of investors like former taxi driver turned tycoon Liu Yiqian, who built his wealth on what he learned talking stocks with fellow investors on Guangdong Road.

"You can see smiles on people's faces these days, while the crowds were so morose last year," said Zhu Xinglong, who has been going to the spot for over 20 years.

The groups were largely lugubrious last year as the benchmark Shanghai Composite Index slumped 24.59 percent, which was the second-largest annual decline after the plummet in 2008. Individual investors lost on average 100,000 yuan ($14,899) last year, as calculated by Shanghai-based market tracker Wind Info.

But confidence has been rekindled since the beginning of this year, as the index had gained 25 percent by Friday, reviving enthusiasm for the streetside stock chats.

"It is certain that market performance will remain strong in the first half of this year as the launch of the science and technology innovation board approaches. My prediction is that the Shanghai Composite Index will hover around 3,300 points, but those who have invested heavily during the past two years are predicting it will reach 4,000 points," said Zhang Huaping, another Guangdong Road frequenter.

Great Wall Securities recently said it expects the new board to begin trading in June at the earliest.

Liu Yuhui, chief economist at TF Securities, said the launch of the new tech board will probably help A-share indexes reach higher levels, with the leading listed securities firms reaping the most benefits.

"But the indexes are unlikely to jump dramatically," Liu said.

Michelle Qi, chief investment officer for equities at Eastspring Investments in China, said that the recent surge of A shares is helping recover losses seen last year that resulted from the "unnecessary panic" of the market. So the recent rise cannot be defined as the true beginning of a bull market.

Experts are upbeat about the new tech board's influence on the A-share market. Analysts at China International Capital Corp wrote in a report that listed companies in emerging industries and securities firms will register growth in the short term.

Zhao Peng, vice-president of China Life Insurance Co, one of the largest institutional investors in the country, voiced optimism about the capital markets this year, though uncertainties remain.