I spent a week on the Chinese version of E-Trade. Here's what I found.

Tanner Brown

The maze of platforms and unverifiable information adds frustration to an already nettlesome - to say nothing of risky - stock market in China

Wu Ming spent much of Tuesday sitting alone in his empty Beijing hair salon, trading stocks on his phone.

"It's how I spend nearly all my free time," the hair stylist told MarketWatch in a telephone interview from his small shop in the center of the bustling capital.

His returns suffered as China's markets CN:SHCOMP CN:399106 (HSI00) fell over the last three years, even while many global markets hit record highs. But mainland bourses have seen a slight rebound since the start of the year, despite China's ongoing tepid economy.

"In such a bearish market, you've got to look for the tiniest glimmers, the first small signs of an upswing in a given stock. If this turns into you having forecast a trend, now you've made some money. But these are rare and take time," he said.

But time is something Wu plenty of has these days, as China's domestic consumption struggles even 18 months after pandemic controls were lifted and the country restarted activity. Essentially no one predicted such a flaccid "recovery" in the world's most populous consumer market.

"I have longtime customers texting me, apologizing for not stopping for a haircut because they have resorted to doing it at home themselves to save money," Wu said. "Times are tight for everyone I know."

'I don't know anyone who has a positive net return over the last few years.'Zheng Aileen

He trades solely on China's East Money (CN:300059), an investing website and app and online broker that surpassed U.S. platform E-Trade Financial in market capitalization in 2019 at $15.3 billion. E-Trade was acquired by Morgan Stanley (MS) in 2020, for $13 billion.

One advantage of East Money is that, even amid China's long market downturn, it has continued to charge customers for trades, whereas U.S. peers such as E-Trade, Charles Schwab (SCHW) and Robinhood (HOOD) have cut most transaction fees to zero.

But on China's two main stock exchanges, in Shanghai and Shenzhen, the vast majority of traders are of the mom-and-pop variety.

While many global markets, particularly in the U.S., have touched record highs in the last year - with the Dow Jones Industrial Average DJIA up 14% over the past year and the broader S&P 500 SPX running up a 52-week gain that's 10 percentage points larger.

"We call East Money 'Dumb Money,' " said broker Kane Hu, chief analyst at Peak Investment, a boutique stock brokerage in the western metropolis of Chengdu.

East Money, and other trading platforms mentioned in this report, did not respond to multiple MarketWatch requests for comment.

"Mom-and-pop investors are the backbone of trading in China's domestic A-shares market, so the miserable performance of the last two years is probably pushing trading volumes to very low levels," said Doug Young, director of Hong Kong-based Bamboo Works, which analyzes listed Chinese companies. "A-shares" refers to Chinese firms trading on the bourses in Shanghai or Shenzhen.

"We're probably seeing lots of such retail investors put their dwindling savings into bank accounts, of all places, as there really isn't any other safe place to invest your money right now, considering the terrible real-estate market," Young told MarketWatch from Hong Kong, home to the worst-performing major market in the world last year.

As with many Chinese websites, East Money's site and app comprise, MarketWatch found, a confounding and crowded collection of trading options and information. One needs a Hong Kong ID to trade shares on that city's bourse. Otherwise, most Chinese traders are hobbyists buying and selling mainland company shares.

While trading via funds is an option, most Chinese whom MarketWatch spoke with preferred to gamify the process by choosing specific company shares themselves. "It's more fun that way," said Chengdu-based financial-services worker Zheng Aileen, 28.

Multiple mainland Chinese contacts recommended the app Snowball-x as the best forum to converse with other retail traders and keep abreast of market data, to supplement the information available on apps like East Money.

Numerous traders have reported that their No. 1 complaint about trading domestic shares is the opacity of financial information, driven mainly by government clampdowns on reporting negative stock news.

"I check it every morning and throughout the day. I open it as much as my social-media app," said Zheng.

It has been a rough few years for her trading returns. "Most of the friends I graduated with in finance were confident we could make a bit of money on the side using these apps," she told MarketWatch. "I don't know anyone who has a positive net return over the last few years."

Like East Money, the Snowball-x app seemed a bewildering set of functions, and the social space dedicated to discussing trades was full of unfounded speculation. Numerous traders over the last year have complained to MarketWatch that their No. 1 grievance in trading domestic shares is the opacity of financial information, driven mainly by government clampdowns on reporting negative stock news.

Another frustrating aspect of trading Chinese stocks is the vast number of apps and forums on which to buy and sell.

This crowded market is mirrored in many other Chinese sectors. While the U.S. has a handful of car makers, for example, China has nearly 300. While the American rideshare space has settled into, essentially, an Uber (UBER) and Lyft (LYFT) duopoly, there are dozens of ride-hailing companies used by Chinese customers.

Other nonprofessional traders MarketWatch spoke with said that, among the country's many trading platforms, favorites included HiThink RoyalFlush (CN:300033) for its ease of use, and Huabao, for the array of assets beyond stocks that can be traded.

But these are just the tip of an iceberg in a sea of options for those interested in wagering their money on China's chaotic, opaque and risky stock markets.

And after a week of buying and selling a few hundred dollars' worth of heavily researched, mostly non-state-owned stocks, there was less money in my account than I had started with.

Tanner Brown covers China for MarketWatch and Barron's.

More Tanner Brown dispatches:

China's economy is finally showing bright spots. Worrying signs remain.

China's prognostication is challenging. Witness 2023. And 2024 warning signs are flashing.

China is experiencing an exodus of foreign investment and talent. Xi Jinping is getting worried.

Is this the new normal Xi Jinping promised the Chinese people? Yes and no.

Frosty relations between Washington and Beijing have had a chilling effect on U.S. businesses in China

-Tanner Brown

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