Capital market needs clearing up

The prolonged stock market slump is taking its toll on the mood and aspirations of many young professionals in an industry that once seemed gilded in gold.

For the first time in their relatively short careers, a host of young stock analysts and traders, mostly in their late 20s and early 30s, have had a taste of hard times, as some have been laid off by their firms and others have seen their salaries slashed.

Covering the plight of these former hotshots in the mainland's stockbrokerage community, a reporter at our Shanghai bureau told me that everyone she talked to was unbearably gloomy. The reporter also told me that her husband, who works at a Shanghai-based commercial bank, was so shocked by the cut in his salary that he voluntarily gave up eating fresh fish, his favorite dish, at every dinner. And at the insistence of the husband, the young couple has gone into austerity mode, skimping on everything except books and CDs.

This belt-tightening has spread to other parts of the financial industry as well. But it is important to note that the so-called bloodbath is not without benefits to the longer-term development of the mainland's capital market.

Something similar happened, albeit on a more extreme scale, in the Hong Kong Special Administrative Region after the outbreak of the Asian financial crisis in 1997, which swept through the capital market like a tropical typhoon. The pain brought about by the massive destruction of asset values helped clear the deck for the emergence of a better-regulated and less-cluttered stage on which stronger and more professional players could show off their talents unhindered by entrenched interests that were stale and corrupt.

The mainland capital market certainly needs some cleaning up. There are too many "established" analysts issuing volumes of research papers that read like kung fu novels, depicting mysterious people blessed with supernatural powers moving share prices with total disregard to market practices, securities rules and economic fundamentals. There are those stockbrokers who dispense investment advice like horse-racing tips, picking shares based only on hearsay and rumors, which they then try to masquerade as privileged information.

Not surprisingly, many individual investors blame their losses on poor advice from stockbrokers, whom they said they no longer trust.

But it is sad to note that the young professionals who have been squeezed out in these troubling times are the fresh blood that the industry needs. It is clear that the mainland stock broking community is in desperate need of fresh blood.

But we must remain optimistic and maintain some trust in the wisdom of the marketplace. As Lily Bi, joint general manager of the international human resources consultant firm Hudson in Shanghai said: "Many employers believe the tough economic environment has changed the skills their people need to be high performers. Being flexible and open to change is now among the most desirable attributes. People with these skills will be in demand for the foreseeable future."

Young market professionals who have lost their jobs or seen a big pay cut should take comfort in the knowledge that such setbacks are only temporary and be thankful that the lessons they learn today will prepare them for the difficult task of developing the mainland capital market into a mature and dependable source of funds to finance the next stage of economic growth.