FOREIGN MARKETS SHOW THAT WHAT GOES UP IS SURE TO COME DOWN

Stock bubbles bursting are old news in the United States as most U.S. investors experienced the painful technology bubble burst several years ago. Now, some foreign markets that had experienced gains of up to 500% in two years have started to burst, as well, yet many investors in those countries were unprepared for the severe downturn.

From The New York Times:

A year ago, investors like Guan Ling were ebullient. Chinese share prices had climbed over 500 percent in the span of two years, setting off a nationwide stock buying frenzy.

That was last year. The Shanghai composite index has plunged 45 percent from its high, reached last October. The first quarter of this year, which ended Monday with a huge sell-off, was the worst ever for the market.

Other parts of Asia are as bad, or worse. In India, stock prices have plunged 31 percent in Mumbai; they are off 31 percent in Japan and a whopping 53 percent in Vietnam, another booming economy. Angry investors have burned a securities regulator in effigy in Mumbai, and some are in tears in Ho Chi Minh City, Vietnam.

“I’m getting out of the game,” said Yuan Yuan, 23, a researcher at a fund company in Shenzhen who also invests on his own. “The game is over. Big institutions pulled out first, only leaving the small investors.”

In China, the government fears that angry investors can be a social problem. And so while the state-run media report on the ups and downs of the market, and even warn investors of the risks and pitfalls of investing, the press does not usually report on investors’ anger.

“Actually there are a lot of complaints, but the Chinese media can’t report this,” says Mr. Guan, the former real estate company owner.

Now, in the brokerage house corridors — corridors of pain — one can hear complaints about all the market flaws: the government doesn’t regulate the stock market and it participates in it by allowing mostly big state-owned companies to go public.

There are also complaints about insider trading, stock manipulation, and big investors with government connections, pumping and dumping stocks on small investors.