China’s stock market rout hurts more than fiction of hit drama Blossoms Shanghai

China’s capital market, valued at US$13 trillion at its peak in December 2021, has withered by one-third since then

Stocks listed in Shanghai, the largest of three mainland bourses, lost US$1.45 trillion of their value since the peak

Blossoms Shanghai, Hong Kong filmmaker Wong Kar-wai’s hit show about the heady opportunities and possibilities during the early 1990s in China’s financial hub, has captured the collective nostalgia of an entire nation, in more ways than one.

Fans of the wildly popular 30-episode drama have been flocking to the restaurants, bars and clubs featured and visited by the show’s protagonist since its release on Dec 27. His Huanghe Road neighbourhood, a hub for Shanghai’s Xiao Long Bao (dumplings with a filling of minced pork) and other time-honoured delicacies, is now the must-go destination for out-of-town visitors.

Set in 1992, Blossoms tells the story of A Bao, who struck it rich by punting on the earliest stocks listed on the Shanghai Stock Exchange, highlighted by a concoction of buying craze, wild price swings and insider trading subplots. At the end, A Bao transformed into Mister Bao as he emerged triumphant against a powerful rival in a stock market showdown.

At the time of the drama’s setting, Shanghai’s equity market in real life was barely two years old. The all-share Shanghai Composite Index soared 167 per cent that year, on top of 129 per cent in its debut year, according to exchange data. That back-to-back rally was Shanghai’s best two years on record.

"It is all tears and sorrow now, when people like me look back at the stock market,” said Lu Shunxi, a stock punter since trading first began in Shanghai in November 1990. “The birth of China’s stock market gave an opportunity to novice investors who were drawn to a casino-like market to gamble and prosper.”

For a quarter of a century, Shanghai’s stock market rode on China’s economic engine, which roared along at an average of 10 per cent every year from 1994 to 2007. After the 2008 Beijing Olympics, annual growth slowed to an average clip of 7.6 per cent through 2022.

The largest nation of communists also boasted the world’s second-largest capitalist market, valued at US$13 trillion at its peak in December 2021. China was minting dollar billionaires like the fictional A Bao in Blossoms Shanghai at the rate of almost one every day in 2020, before everything came crashing down.

China’s government responded to the COVID-19 pandemic in 2020 with quarantines and extreme travel restrictions.

Shanghai was locked down for two months in the summer of 2022, when every school, factory, restaurant, shop and office within the city’s limits was ordered to shut. Shanghai’s 25 million residents were mostly kept at home or quarantined at health facilities.

The result was a severe disruption to global supply chains, businesses and livelihoods, from which the economy is still struggling to recover.

China’s economy grew at a scant 0.4 per cent in the second quarter of 2022, and only managed to eke out a 5.2 per cent growth in the final quarter of 2033, months after all COVID-19 restrictions were lifted.

Frustrated investors voted with their feet, pulling a record amount of money from the stock market over the past six months, punishing China’s reluctance to deploy a stimulus programme to rescue the economy.

Shanghai-listed stocks have lost US$1.45 trillion of value since the market’s peak in December 2021. The nation’s equity market shrank by US$4.2 trillion over the same period, according to market data.

“Trading shares has become my biggest mistake in life since I keep losing money over the past two decades,” said Li Yan, an employee with a state-owned media company in Shanghai. “I have had to deposit more money into my brokerage account to try to overturn the losses. But the attempts have all resulted in more nightmares.”

Li is not alone.

Even veterans and hedge fund stars have been brought to their knees in China’s market slump for misreading the tea leaves. Singapore’s hedge fund Asia Genesis Asset Management threw in the towel earlier this month, wrong-footed by its bullish view on Chinese stocks over the past year, as well as its bearish bets on Japanese equities.