When it comes to stock trading, age does not necessarily equal wisdom.
At just 18 years old, Liang Hao has outperformed many institutional investors and private equity funds by making a nearly 100 percent profit from the stock market last year.
Over the years the high school student from Guangzhou, the capital of Guangdong province, has turned 70,000 yuan ($10,253.26) into several hundred thousand with his wily deal making. And he`s cunning enough not to specify exactly how much he has made.
Liang, a believer in Warren Buffett`s concept of fundamental analysis, is now primarily focusing on value investment and low-risk arbitrage trading to take advantage of price differences between the mainland and the Hong Kong market.
The youngster said one of his recent successful deals was an A+H arbitrage transaction where he bought the stock of China Shenghua Energy Co Ltd on the mainland`s A-share market while purchasing a callable bear contract of China Coal Energy Co Ltd in the Hong Kong market to hedge risks. He said he made a 20 percent gain in profit from the trading in less than a month.
"I prefer low-risk arbitrage trading because the key to investment is not to make a lot of money but to preserve one`s asset first," said Liang. "A clear mindset and proper investment concept and a habit that fits one`s personality are what I think matters the most in stock trading."
Very few high school teenagers are thought to be investing in China`s stock market, but Liang may represent a rising group of young, new investors in the country that are becoming more rational and are armed with well-cultivated independent thinking and analysis skills. They are in distinct contrast with the conventional view of small investors who view the stock market like a casino capable of churning out a quick profit.
Liang first dealt in the stock market at the tender age of 14 when the market slumped sharply in 2004. His father, who runs a steel trading company in Guangzhou, was his first investing mentor. Liang`s initial capital was the 70,000-yuan "lucky money" that he had saved over the years.
It did not take long for the young trader to turn from an investing novice who didn`t even know how to read candlestick charts into a sharp investor who started to make profits his father could not even match.
The year 2008 was a tough year for most Chinese investors. The benchmark Shanghai Composite Index fell to 1,664 from a highpoint of 6,124 in 2007. It slumped more than 65 percent in 2008 with the market value decreasing by 17.2 trillion yuan.
Liang, like many investors, learned a hard lesson in the bear market of 2008. His investment in Citic Securities and Shanxi Xinghuacun Fen Wine Factory Co Ltd resulted in heavy losses and he eventually cut his entire holding at a low price.
But the high school teenager said his passion for the financial market would continue to grow. He has decided to major in finance at college and gain some work experience in investment banks after graduating. Liang said his ultimate goal is to run his own fund management company in the future like Buffett`s Berkshire Hathaway.