How I Shrank 450K Yuan to 50K

Chinese shares have had a depressing year. Photo: jmmwMain reference: Story in Sinafinance

I TURNED A nearly half million yuan portfolio into just 50,000 yuan.

I first started buying shares in 2007 when the Shanghai Composite Index was in very alluring territory north of 5,800 points (it’s currently hovering at around 1,950).

All of my own money and my family’s money found its way into the market fund I set up at the time, some 450,000 yuan worth, which also included money earned from the recent sale of our family-owned shop.

So what did I buy back then?

It’s a laundry list of virtual volatility, including some of the most unstable picks these past several years that one could randomly throw his hard-earned money at.

I was heavily exposed to China Vanke (SZA: 000002), Air China (SHA: 601111), China Nonferro Metal (SZA: 000758), Western Mining (SHA: 601168), Yunnan Copper (SZA: 000878), Guangji Pharmaceutical (SZA: 000952), Dongfang Electric (SHA: 600875), Angang Iron & Steel (SZA: 000898), Wuhan Iron & Steel (SHA: 600005), Shanghai Datun Energy (SHA: 600508), Guangzhou Development Group (SZA: 600098), Sinopec (SHA: 600028) and China Construction Bank (SHA: 601939).

As you can see, it’s a commodities-heavy list, and we all know how volatile steel prices in particular can be, with sharp fluctuations in iron ore and shipping costs playing havoc with bottom lines.

Unexpected Turbulence: Air China has been affected by economic volatility and anxiety over bird flu.
Photo: CompanyAlso, Vanke is China's top residential developer and thus often captive to macroeconomic controls while Air China is victimized by economic downturns during which leisure and business travel crawls to a halt.

To make a long story short, in 2008 came the Wall Street Crash and in the following year, out went my money – a perfectly respectable 450,000 yuan portfolio shriveled down to under 50,000.

At that time, I must admit I spent more time thinking of ways to end my life than I did brainstorming strategies to get my money back.

The very thought of throwing away my life’s savings in such a way still causes me many a sleepless night, even to this day.

In 2009, I began to scrutinize in earnest the relationship between economic policy and share trends and soon noticed that listed brokerages were some of the earliest beneficiaries of new pro-growth policies from on high.

So I approached willing lenders, hat in hand, and managed to put together 50,000 yuan. I dumped it almost completely into A-share listed securities firms.

High on my list were Haitong Securities (SHA: 600837) and Citic Securities (SHA: 600030) as I appreciated their relatively stable incomes and business growth.

At the same time, I made many calls to Haitong, which so happened to also be my own brokerage, and you can imagine what they told me over and over again.

Recent China shares performance.     Source: Yahoo Finance

They urged me to keep buying of course!

In late 2007, Haitong’s shares were flirting with 70 yuan, but dropped off the map when Wall Street collapsed the following year.

I had bought in at around 18 yuan in late 2009 and the shares are currently just under 10 yuan.

I’ve held onto them for nearly four years now and I am tired of running and am staying put.

I don’t trust the economy when buying stocks.

After all, look at the US with its record high Dow and 2% GDP growth!

What good is China’s 8% GDP if we’re stuck with this A-share market?

The only consolation I can take from my Haitong shareholding position is that it hasn’t seen a major rise or fall in four years, so I’ll just have to keep waiting it out to try and recoup my capital.

See also:

FROM CUSHY TO CARDBOARD: PRC Investor's Sad Story