Market studies

By Yu Xi Source:Global Times Published: 2015-6-16 19:13:04

Survey shows 31% of college students investing in stocks

A recent survey found that 31 percent of Chinese university students are currently investing in the mainland's soaring stock markets. With personal saving and money borrowed from their parents, some students are spending hours doing research and sinking tens of thousands of yuan into the markets. The situation has left some wondering whether it is time and money well spent.

Photo: CFP

Zhang Chi, a finance major at Zhejiang Gongshang University, has made 20,000 yuan ($3,221) in the stock markets this year.

Since April, the university senior has parlayed the 100,000 yuan he borrowed from his parents into a 20 percent return.

Zhang said he spends six to seven hours a day researching stocks. As a finance major, he hopes investing will help him learn about the financial markets and eventually get a good job.

He is far from the only university student who is investing in the mainland's stock markets, which are up nearly 150 percent over the past year.

According to a survey conducted by the Xinhua News Agency on June 2, 31 percent of university students have money invested in the stock markets, with 26 percent investing more than 50,000 yuan.

To put that into perspective, a year of college tuition costs about 5,000 yuan on average in China.

The Xinhua survey didn't provide figures for comparison, so it is impossible to say if student investing is a growing trend. However, the numbers are clear that more and more people in China overall have been jumping into the stocks markets over the last few months.

On the Shanghai Stock Exchange, investors opened 342,791 new stock market accounts each day on average in April, up more than 206 percent from March, according to monthly data from the China Securities Depository and Clearing Co.

On the Shenzhen Stock Exchange, 271,638 new accounts were opened each day on average in April, up 149 percent month-on-month, though it should be noted that new account growth slowed in May on both exchanges.

But the average college students differ from the typical individual investors in two ways. First, college students are usually investing with someone else's money. Second, they are spending time that - at least as far as their parents are concerned - would be better spent on their studies.

The situation raises the question of whether it is worthwhile for college students to be investing in the stock markets.

Risks exist

With stocks surging, it is easy to forget that equities markets can both fly high and fall hard.

One doesn't have to remember farther back than 2007 for an example. The Shanghai Composite Index, the main gauge of stocks traded on the city's bourse, hit an all-time high of 6,124.04 points on October 16, 2007, before plunging more than 70 percent to touch a low of 1,664.92 points on October 28, 2008.

Zhang is aware of the risks. The money he borrowed from his parents is only a small amount of his parents' assets, he said, so it is money they can afford to lose. Still, he is cautious.

"Of course, I'm also concerned about losing money. At the beginning, I would sell my stocks as soon as I earned 500 yuan," he told the Global Times Sunday.

Zhang also used to be quick to sell when his investments started to lose money, but he has gradually learned to be more patient.

"It took some time, but now I can stay calm if the loss is within 8 percent," he said.

Time and money

Wu Xulei, an English major at Shanghai International Studies University, has invested 30,000 yuan in the stock markets since November 2014 and earned about 5,000 yuan. She borrowed part of the money from her parents. The rest came from money she saved from her New Year's hongbao, red envelopes containing cash given by parents and relatives.

In the beginning, Wu said she followed her parents' suggestions, but gradually she began picking individual stocks herself.

"Normally I focus on emerging industries like the Internet and environmental protection," she told the Global Times Monday.

Most college students borrow money from their parents to invest, said Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology.

"Students are attracted to the booming stock markets because they think it will also be easy for them to earn money in the bull market," Dong told the Global Times Monday. "However, it's still quite risky."

Dong also thinks it is a waste of time for students to research individual stocks every day.

Like Zhang, Wu spends hours of her day researching her stock picks. She said she normally spends six hours a day doing research.

Li Chang'an, a professor at the School of Public Administration at Beijing-based University of International Business and Economics, doesn't believe this is time well spent.

"I don't think it's a good idea for college students to spend too much time investing in the stock markets," Li told the Global Times Monday.

In his experience, students spend a lot of time researching stocks, but usually earn low returns.

Returns on investment

The issue of returns is important because neither Zhang nor Wu has managed to beat the market since they began investing.

According to Zhang's account, he has earned a 20 percent return on his investments since April. Wu said she has earned 16.7 percent since November. By comparison Shanghai's benchmark index has risen 30.4 percent since April 1 and 101.94 percent since November 1.

If Zhang, Wu or any other individual stock picker had invested in the market as whole, through an index fund, for example, they would have made more money and saved themselves a lot of time.

Zhang said he prefers to invest in individual stocks because he doesn't know index funds well and sees his investing as an educational venture as much as a financial one.

"I hope to learn more about the markets by investing myself, because I hope to work for securities companies in the future," he said.

Student investors don't see making money as the major reason for investing, said Zhang Xin, a senior analyst from Guotai Junan Securities Co.

"Today's college students were all born in the 1990s," Zhang told the Global Times Monday. "They prefer to have fun by investing in individual stocks themselves."

Investing in index funds also cannot generate high returns as quickly as investing in individual stocks.

"Over a specific period, it is possible to earn more by investing in individual stocks than in index funds," said Zhang from Guotai Junan.

In contrast, investing in index funds is a lot less appealing to students, said Li, the professor.

"College students are not patient enough to wait for a long time, so they prefer to invest into individual stocks," he noted.

Still, at least one student can see the downside in investing in individual stocks.

"For non-finance students, I don't really suggest that they invest in the stock markets," Zhang said. "It really takes a lot of time."

Posted in: Insight

blog comments powered by Disqus