Entrance is free, but the software will set you back $490.
- By Warner BrownWarner Brown is a frequent contributor to FP's Tea Leaf Nation. He is based in Shanghai.
SHANGHAI — On the afternoon of May 5, Li Chaoli stood on a sidewalk in a bustling business district, handing tourists and office workers brochures promising the keys to great wealth. Li had arrived in Shanghai, China’s financial capital, less than a month before from her native Yunnan province and soon found a job promoting Homily Stone, a software package that promises to help investors achieve easy profits by choosing fast-rising stocks. “We also offer classes to teach stock trading tips,” Li explained while trying to register the phone numbers of passersby on a notepad. “So it’s no problem if you don’t know much about stocks.” Everyone, she noted, is starting out the same way.
The 21-year-old Li is just one of many to be swept up in China’s latest stock craze, the biggest in nearly a decade. Despite concerns among analysts that China’s economic fundamentals are weakening, recent pro-growth government measures like cuts to interest rates and banks’ reserve ratio requirements have helped stoke stock prices to heights not seen since 2008, the last time the stock market crashed. The benchmark Shanghai Composite Index rose from about 2,000 in July 2014 to just over 5,000 on Friday, June 5. Openings of new stock trading accounts surged to a record in the last week of May, and domestic media reported that the same period saw a net increase of 1.6 million new investors, equivalent to the population of Philadelphia jumping into the stock market in a single week. The rising tide of neophyte investors has caught the attention of touts throughout China.
One example, of a great many, is Homily Stone. On a Sunday morning in mid-May, nearly 500 pupils filed into an aging Shanghai office tower to hear a lecture from Chen Haisheng, one of Homily Stone’s purported in-house stock experts. An entry fee of $320 lent an air of exclusivity, but the ubiquitous fee waivers that Li and other staff members handed to virtually everyone — this writer included — suggested that Homily Stone may have had another, bigger pot of money in its sights.
Attendees registered and found their assigned seats in a multipurpose room lined with posters showing cartoon bulls, rising trend lines, and slogans such as “Homily Stone: simple and straightforward, happy stock-trading.” The number of graying heads was conspicuous, and most of the students appeared 50 or older. Some students set up camcorders on tripods and readied binoculars before Chen took the stage. As Chen projected Homily Stone’s software on a screen and began by reviewing the basics of “buy low, sell high,” the students alternated between scribbling notes and stealing bites of steamed buns and swigs from milk cartons and thermoses of tea.
After more than two hours of Chen’s lecture, a few older people in chairs nodded off, including an elderly gentleman who took a nap on my shoulder. For the most part, though, Chen kept people’s attention, peppering his Beijing-accented talk with laugh lines, requests for the audience to repeat pithy slogans, and demonstrations of forecasting that aroused murmurs of approval.
As the morning session neared its close, Chen promised more detailed stock-picking tips to those who gained admission to an afternoon class by paying $490 for a trial of Homily Stone’s software. A hush fell over the room when Chen predicted the Shanghai Composite’s 2015 bull market could reach a high of nearly 5,700 — about 33 percent above its then-level of 4,300. And when he guaranteed a 300 percent return for people who buy the program and follow his methods with recommended “dragon head” — or hot — stocks, the room erupted in applause.
Advice on how to become a Chinese stock market whiz — paid, of course — currently comes in many forms, ranging from sidewalk hucksters peddling instructional DVDs, to invitation-only social media discussions led by professional analysts at large brokerage firms. Investors using mobile stock apps have become a frequent sight in offices, coffee shops, and crowded subway cars here. Only time will tell which, if any, of these methods is effective. The last time China’s stock market was this frothy was over 2006 and 2007, when investors bid the Shanghai Index from just over 1,000 to a high of more than 6,000, before a crash in 2008 sent the index as low as 1,706 and left many investors shorn of their life savings. Most analysts agree that the current bull run has inflated a bubble that also must necessarily pop, but can only speculate on how much higher the market can climb before the fall.
After the class, Homily Stone staff set off explosions of confetti as a group of silver and gray-haired students formed a line to sign up for the software. When asked about the audience’s age, an employee conjectured, “Older folks tend to have more free time, and their level of trust tends to be higher.” Meanwhile, Li, dressed in a pant suit, had stood by a wall watching attentively all morning. I asked her if she planned to try to get a piece of China’s bull market for herself. She seemed embarrassed. “I don’t know much about buying stocks,” she replied. “I’d like to learn some more at this company before doing any trades myself.”
Photo credit: ChinaFotoPress/Getty Images