26 October 2016
Many young people desire to have their own homes and invest in stocks to jumpstart their plans. Photo: HKEJ
Many young people desire to have their own homes and invest in stocks to jumpstart their plans. Photo: HKEJ

Young investors rushing into stock market end up with huge debts

A growing number of young people are investing in the stock market in the hope of saving enough money as down payment for their own apartment.

That makes good business sense for some people, as in the case of a young man who was able to buy his own flat at Tsing Yi Garden with profits from playing stocks, Sky Post reported. The stock market has seen hefty increases in the past few weeks due to an influx of hot money from the mainland.

But counselling groups warn that not all stories from stock market investors are cheerful ones.

The Caritas Addicted Gamblers Counselling Centre said it received 15 calls for help related to young people who incurred huge debts from their stock investments in the first three months this year, up from 11 cases during the same period in 2014.

Most of the calls came from parents who have to repay debts for their children who had invested in stocks.

Zion Social Service Yuk Lai Hin Gambling Counselling Centre said it had three cases in March, compared with four for the entire 2014.

Social worker Tam Kin-chung from the Hong Kong Confederation of Trade Unions (HKCTU) said more and more young people have sought help regarding investment issues during the past three to four years, averaging at one to two cases each year.

Most cases involved stock investments intended to jumpstart flat purchase plans, Tam said.

The biggest problem is that most of these young people are not knowledgeable enough about stock trading, he said, adding that they simply followed the herd.  As a result, most of them have incurred substantial losses.

Chow Nga-ying, a director at Sunshine Lutheran Centre, said a case she was given last week should provide a good lesson for would-be investors.

In the case, a young man who lives in a public housing estate started investing in the financial markets as he wanted to save enough to acquire his own private property.

Later he quit his day job as a salesperson and became a full-time investor.

Unfortunately, he incurred a debt of HK$800,000 from his stock trading during the 2008 financial crisis and, desperate to recover his losses, started to gamble heavily in Macau.

Most recently, the young man committed a crime in his desire to pay off a debt of HK$300,000 but was arrested.

Chow said many young people have misconceptions about investing in the stock market.

TWGHs Even Centre director Yeung Tung-ying said investors should bear in mind that there is no formula that will guarantee profits, and that the stock market could go down as well as up.

Borrowing money to invest in stocks is the last thing an investor should consider, Yeung said.

Ricky Tam, chairman of the Hong Kong Institute of Investors, said futures, callable bull/bear contracts, and warrants are highly volatile leveraged investment tools that track the performance of underlying assets.

Tam recommended that investors under the age of 40 could allocate up to half their assets (excluding properties) on stock and funds, while those above 50 should lower such threshold to under 30 percent.

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