While Chinese investors can’t seem to satiate their hunger for domestic shares, the Germans are avoiding them like the plague. But there are plenty of exceptions, according to our columnist Zhang Danhong.
When Klaus was first handed the certificate that made him an official VW shareholder, he was only 8 years old. His parents wanted him to learn the way the economy works and gave him the Volkswagen share as a Christmas present. Attached to the certificate was a sheet of coupons. Each year, Klaus tore a coupon from the sheet and redeemed it for a dividend at his local savings bank.
Klaus was in good company. Already 200 years ago, Arthur Schopenhauer cashed in so many coupons that he was able to live from the profits and could afford to spend his life philosophizing about “The World as Will and Representation.” But the Germans didn’t reserve much respect for such investors. That’s where the word “coupon cutter” comes from. While others were out toiling away, they only needed a pair of scissors to cut loose their precious coupons.
Bargains, yes, speculation, no
To this day, little has changed in the Germans’ attitude toward the markets. According to the Deutsches Aktieninstitut, a nonprofit group that advocates equity ownership, only 4.1 million Germans had invested money in stocks at the end of 2014. That’s about 6 percent of the population.
In Germany, people associate stocks with speculation. And “whoever hears the word ‘speculation,’ is immediately turned off,” says Martin Hüfner, the chief economist at Assenagon. “Yet driving another 10 kilometers to the next gas station because it’s cheaper, or shopping for bargains, that’s OK.”
The Chinese love their rebates and they love their stocks. Although the markets in the People’s Republic are only 25 years young, share trading has become a beloved national sport of sorts. This has something to do with the fact that the Chinese government has encouraged trading in order to compensate for the unequal distribution of wealth. But Asians are also less risk averse by nature. By now, every third student has a stock portfolio, according to China’s state news agency Xinhua.
Stock picks are indispensible gossip in Chinese neighborhoods or around the water cooler. Anecdotes about getting rich quick by trading securities spread like wildfire. Experts with halfway unerring forecasts are practically celebrated as Gods.
There is a Chinese word for every market situation imaginable. “Chaogu,” literally a “wok-fried stock,” signifies stock trading. The term “Jietao,” meaning “to unleash oneself,” describes a sense of relief that follows a dry spell after which a trader was able to unload his shares at the acquisition price. And sometimes you have to have the courage to let go of losing stocks – that feat is called “Gerou,” or “shooting yourself in the foot.” If that’s not enough, you have to “clean up shop,” or “Qingcang,” i.e. sell all of your stocks. The recent market slump in China has left many investors fluent in this esoteric stock-trading vernacular. But that doesn’t mean that any of them will forever turn their backs on the markets. Rather, they’ll bide their time before the next big opportunity and “fry” other things. Like, say, real estate (“Chaofang”).
The German fear of losing
That’s one area where the Germans are fundamentally different from the Chinese. To stay true to my Chinese metaphors: The Germans are afraid of the rope just because they were once bitten by a snake. The Germans have been getting bit since 2001, when the Internet bubble burst and the markets tanked. The number of investors in Germany sank dramatically.
“In people’s minds, various prejudices have solidified,” says Christine Bortenlänger, the managing director of the Deutsches Aktieninstitut. One of those prejudices goes something like this: Share trading is something for die-hards. They can quickly cause serious losses and be very painful. This may sometimes be true, but it’s not always the case. A deep breath is sometimes all it takes to prevent someone from shooting themself in the foot. “If you don’t touch your stocks for longer than 13 years, the chances of incurring losses is virtually zero,” says Bortenlänger. Thirteen years is too long for someone who has purchased stocks on credit, of course. But those people aren’t heeding rule No. 1: Never build a portfolio with someone else’s money.
That was always the most important principle of my friend Klaus. Meanwhile, he’s 40 years old and has since paid off his student loans and has been investing in solid bets. He doesn’t fry anything in woks – he prefers to let things simmer. He also doesn’t go to the bank anymore for his dividends – he just reinvests them into new stocks. He lets his money work for him and is grateful for his parents’ lesson that Christmas many years ago.