What have investors

1
What have investors behavior and information
disclosure revealed?

• Song Liping
• July 2008

2
Foreword

• It is vitally important for us to protect
  investors interests.
• www.csrc.gov.cn
• Protection of investors interests is protection
  of Wall Street.
• Wall Street
• Regarding the Pain of Others,do we have
  sufficient power to sustain?
• Regarding the Pain of Others
• Susan Sontag

3
Contents

• Current Condition 1Analysis of investor
  structure
• Current Condition 2Analysis of investor behavior
• Current Condition 3Test Analysis of Investor
  pressure
• Current Condition4Analysis of Annual Reports of
• Listed
  Companies on SZSE
• SZSEs Work

4
Current Condition 1Analysis of investor
structure

• 1. A-share trading and newly-opened accounts on
  SZSE, year 2001-2007

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

5
Current Condition 1Analysis of investor
structure
2. Age Distribution of A-share traders 20052007
Age No. Of Accounts 2007 (10,000) Accounts 2007() New Accounts 2005() New Accounts 2006() New Accounts 2007()
Under 30 890.40 16.41 32.45 32.60 35.61
3040 1705.80 31.42 35.78 34.94 34.73
4050 1404.35 25.87 16.80 17.27 18.37
5060 865.09 15.93 8.84 9.66 8.01
6070 338.16 6.23 4.21 3.93 2.47
Over 70 224.46 4.14 1.91 1.59 0.81
Noteall the ranges are righ-open,e.g. , range
405 0includes 40

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

6
Current Condition 1Analysis of investor
structure
3. Trading account and trade distribution
Trader Type (in account value of 1,000 yuan) Ratio of traders () Capitalization ratio() Ratio of trading accounts() Ratio of trading value () Net trading value (100 million yuan)
0 0.000 0.000 2.073 0.928 -193.60
100 83.376 15.356 79.826 26.375 459.96
1001000 15.395 26.378 16.838 39.694 667.92
10005000 0.922 11.597 0.987 14.404 -1.43
500010000 0.065 2.867 0.067 3.049 -55.69
10000 and over 0.033 4.147 0.029 2.987 -174.16

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

7
Current Condition 1Analysis of investor
structure
4. Investors 'age and trading history
Trader type (in 1000 yusn) Age distribution Age distribution Distribution of trading history Distribution of trading history Trader Type Traders Age Traders Age Trading History Trading History
Trader type (in 1000 yusn) Type Type (years) (in 1000 yusn Tpey Type (years)
Under 100 Under 30 11.93 Under 2 29.58 500010000 Under 30 9.63 Under 2 22.31
Under 100 3050 59.44 26 4.87 500010000 3050 63.61 26 12.06
Under 100 Over 50 28.63 610 34.06 500010000 Over 50 26.76 610 25.72
Under 100 Over 10 31.48 500010000 Over 10 39.91
100-1000 Un der 30 6.39 Under 2 19.69 Over 10000 Un der 30 9.45 Under 2 25.51
100-1000 3050 62.02 26 6.81 Over 10000 3050 62.63 26 13.53
100-1000 Over 50 31.58 610 31.79 Over 10000 Over 50 27.92 610 23.32
100-1000 Over 10 41.71 Over 10000 Over 10 37.64
10005000 Under 30 7.52 Under 2 18.44 Overall Under 30 11.06 Under 2 28.02
10005000 3050 64.55 26 9.92 3050 59.88 26 5.22
10005000 Over 50 27.93 610 27.27 Over 50 29.06 610 33.60
10005000 Over 10 44.37 Over 10 33.16
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Current Condition 2Analysis of investor behavior
1.Investors portfolio and trading preferences

• Investors valued less than 1 million yuan
• Small-cap
• Low price
• Low earnings
• High PE
• ST shares
• Low price hike in the previous period

• Institutional
• Large cap
• High trading price
• Good earnings
• Low PE
• Non-ST
• Substantial price hike in the previous period (6
  months)

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Current Condition 2Analysis of investor behavior

• 2. Investors Average Holding Period

(2) Investors length of stock holding (days)
(1)Investors length of stock holding ()
Investor type (1000 yuan) 2007 2007 2007
Investor type (1000 yuan) 03 months 312 months Over 1 year
Under 100 81.42 8.50 10.08
100-1000 83.99 10.58 5.43
1000-5000 82.98 12.31 4.71
5000-10000 81.71 14.54 3.75
10000 or over 77.93 18.40 3.67
Total 82.42 8.32 9.25
Investor type (1000 yuan) 2007
Under 100 113.49
100-1000 76.40
1000-5000 74.93
5000-10000 74.13
10000 or over 80.17
Average holding peroid of individual investors 105.77

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

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Current Condition 2Analysis of investor behavior

• 3. Investors trading frequency and capital
  turnover

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

11
Current Condition 2Analysis of investor behavior

• 4. Investors trading performance

Performance by Investor Type ( 10,000 yuan)
Performance by Investors trading history

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

12
Current Condition 3Test Analysis of Investor
pressure
Based on Feb 25 values, suppose the index fell
0, 10, 20, 30 , the would-be gains and losses
for investors
Investor types (In 1,000 yuan) Paper value of gains and losses() Paper value of gains and losses() Paper value of gains and losses() Paper value of gains and losses() Losing accounts() Losing accounts() Losing accounts() Losing accounts() Average balance(10,000 yuan) Average balance(10,000 yuan) Average balance(10,000 yuan) Average balance(10,000 yuan)
Investor types (In 1,000 yuan) - 0 -10 - 20 -30 -0 -10 -20 -30 -0 -10 -20 -30
Others 1.82 -2.08 -5.99 -9.90 52.62 58.06 59.47 59.98 0.08 -0.09 -0.25 -0.42
Under 100 17.72 13.59 9.45 5.32 31.96 37.52 41.84 45.32 0.88 0.67 0.47 0.26
100-1000 26.19 21.45 16.72 11.99 22.38 27.63 32.83 37.80 11.66 9.55 7.44 5.34
1000-5000 36.15 30.93 25.72 20.50 16.91 21.28 25.92 30.68 105.47 90.25 75.04 59.83
5000-10000 44.94 39.32 33.70 28.08 14.42 18.66 23.03 27.29 423.93 370.90 317.87 264.84
Over 10000 64.24 56.58 48.93 41.27 11.66 15.55 19.89 24.38 1531.96 1349.40 1166.84 984.28
Individual 25.88 21.17 16.46 11.75 33.26 38.77 42.85 46.14 2.99 2.45 1.90 1.36
Institutional 62.78 52.71 42.65 32.59 15.59 18.53 20.73 22.67 1112.64 934.32 756.00 577.67

• SourceShen Zhen Stock Market Investors Structure
  and Behavior, Year 2007, Financial Innovation
  Lab. and Research Institute , SZSE

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Current Condition 4Analysis of Annual Reports
of Listed Companies on SZSE

• More qualitative analysis, less quantitative
  analysis more display of numbers, less analysis
  and explanation

• Absent of disclosure of senior manager and
  supervisors salary

• Earnings forecast delayed and inaccurate

• Independent directors reports are trite and
  insubstantial.

• Disclosure of Internal control tends to
  superficially comply with forms and norms.

• Inaccurate or incomplete disclosure on the de
  facto controlling shareholder

• Less-than -expected observance of new accounting
  standards.

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From status quo to a better world

• Small and medium individual investors are the
  bulk of the investor population and provide most
  of the market liquidity.

• Small and medium investors tend to have high
  trading frequency, common style of investment and
  low investment returns. Close attention must be
  paid to systematic risk thus accumulated.

• Strengthen investor education and increase risk
  awareness in investors.

• Strengthen innovation in products and
  institutions, improve market liquidity and
  establish multiple channels of investment.

• Strengthen categorical trading account management
  practice and reinforce SZSE members trading
  management function.

• Improve quality of information disclosure and
  protect investors right to know.

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SZSEs Work
The multiple dimensions of investor protection
determines its complexity and systematic nature.

• Depositary and clearing institution
• Fund for protection of investors interest
• Supervisory Institutions
• Fund companies

• Listed companies
• Securities firms
• Intermediary institutions
• Stock exchanges

Relationship with the trading entity

• Natural person/legal entity
• Client
• Trading entity

• Financial products/services consumers
• Shareholder
• Debt claimant

Investors Identities
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SZSEs Work
Protecting investors interests as
Trading entities
Consumers of financial products and services.
Shareholders and debt claimants
Natural persons and legal entities
Clients of securities firms
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Thank you