Share

Roaring Twenties in Shanghai: the rise and fall of China’s youngest star investor

Liu Zhengtai became a stock-buying god while still a student at Fudan University in Shanghai, boasting of 1,000 per cent returns as he debated on television with the country’s best-known market analysts about how to make quick cash.

Liu rode the investment boom that kicked off in late 2014, with people begging him for tips. When the market dived last summer, he disappeared from public only to re-emerge in September, and he continues to manage his investment fund.

Instead of becoming the Chinese answer to a young Warren Buffet, Liu has seen his fund lose nearly half its value in just a few months. And he could be at legal risk, according to one lawyer, due to his unusual arrangement for financing his share purchases. He pools client money into a personal trading account and uses it to buy units in his fund.

Underpinning his downfall is the lure and danger of a deeply volatile stock market defined by immaturity. As the United States did during the Roaring Twenties, China has undergone a rapid economic thrust upwards that can fulfil and destroy young people’s dreams practically overnight.

Examples abound: Ding Ning was just 35 years old when his Ponzi-style Ezubao scheme raised nearly US$10 billion from nearly a million investors; while Xu Xiang, once China’s top stock investment fund manager, was 38 when he was arrested last year.

China’s HK$59 billion online Ponzi scheme: who started it, how did it happen and now what?

Qian Qimin, an analyst at Shenwan Hongyuan Securities in Shanghai, said the domestic stock market, created in the early 1990s, remained too volatile for individual investors to reliably bet on long-term stable returns.

“There’s no ever-winning generals or gods in China’s stock market,” Qian said.

The fund under Liu’s management, called Fuying No. 1, lost 40 per cent of its value since inception, according to figures released on Simuwang.com, a website tracking the net value of non-publicly traded funds.

Liu has pooled into his personal account more than 6 million yuan (HK$6.9 million) from 40 clients, but as of September, only about 300,000 yuan remained, according to a letter Liu sent to his clients and seen by the South China Morning Post. Liu promised in the letter to shoulder all his debts and repay the clients in the coming years.

Reforming China’s stock market still has some way to go, and it is a difficult journey

Feng Jiaqing, the deputy director of Shanghai-based Hiways Law Firm, said Liu’s fundraising carried legal risks and his responsibility was subject to regulatory findings.

But Liu remains undeterred. In a brief telephone interview with the Post, Liu said he would continue to speculate. “I have reached agreements with my clients and all disputes have been settled,” Liu said. “There are always risks about investments.”