1. What have investors ’ behavior and information disclosure revealed? Song Liping July 2008

2. Foreword It is vitally important for us to protect investors’ interests. ——www.csrc.gov.cn Protection of investors’ interests is protection of Wall Street. ——Wall Street Regarding the Pain of Others ， do we have sufficient power to sustain ？ ——Regarding the Pain of Others Susan Sontag

3. Contents Current Condition 1 ： Analysis of investor structure Current Condition 2 ： Analysis of investor behavior Current Condition 3 ： Test Analysis of Investor pressure Current Condition4 ： Analysis of Annual Reports of Listed Companies on SZSE SZSE’s Work

4. Current Condition 1 ： Analysis of investor structure 1. A-share trading and newly-opened accounts on SZSE, year 2001-2007 Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

5. Current Condition 1 ： Analysis of investor structure 2. Age Distribution of A-share traders 2005~2007 Age No. Of Accounts 2007 （ 10,000 ） Accounts 2007 （ % ） New Accounts 2005 （ % ） New Accounts 2006 （ % ） New Accounts 2007 （ % ） Under 30890.4016.4132.4532.6035.61 30 ～ 40 1705.8031.4235.7834.9434.73 40 ～ 50 1404.3525.8716.8017.2718.37 50 ～ 60 865.0915.938.849.668.01 60 ～ 70 338.166.234.213.932.47 Over 70224.464.141.911.590.81 Note ： all the ranges are righ-open ， e.g., range 40~5 0includes 40 Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

6. Current Condition 1 ： Analysis of investor structure 3. Trading account and trade distribution Trader Type (in account value of 1,000 yuan) Ratio of traders （ % ） Capitaliza tion ratio （ % ） Ratio of trading accounts （ % ） Ratio of trading value （ % ） Net trading value (100 million yuan) 00.000 2.0730.928-193.60 10083.37615.35679.82626.375459.96 100~100015.39526.37816.83839.694667.92 1000~50000.92211.5970.98714.404-1.43 5000~100000.0652.8670.0673.049-55.69 10000 and over0.0334.1470.0292.987-174.16 Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

7. Current Condition 1 ： Analysis of investor structure 4. Investors 'age and trading history Trader type (in 1000 yusn) Age distribution Distribution of trading historyTrader TypeTraders’ AgeTrading History Type%Type (years)%(in 1000 yusnTpey%Type (years)% Under 100 Under 3011.93 Under 229.58 5000~10000 Under 309.63 Under 222.31 30 ～ 50 59.44 2～62～6 4.87 30 ～ 50 63.61 2～62～6 12.06 Over 5028.636~1034.06Over 5026.766~1025.72 Over 1031.48Over 1039.91 100-1000 Un der 306.39 Under 219.69 Over 10000 Un der 309.45 Under 225.51 30 ～ 50 62.02 2～62～6 6.81 30 ～ 50 62.63 2～62～6 13.53 Over 5031.586~1031.79Over 5027.926~1023.32 Over 1041.71Over 1037.64 1000~5000 Under 307.52Under 218.44 Overall Under 3011.06Under 228.02 30 ～ 50 64.55 2～62～6 9.92 30 ～ 50 59.88 2～62～6 5.22 Over 5027.936~1027.27Over 5029.066~1033.60 Over 1044.37Over 1033.16

8. Current Condition 2 ： Analysis of investor behavior Institutional Large cap High trading price Good earnings Low PE Non-ST Substantial price hike in the previous period （ 6 months ） Investors valued less than 1 million yuan Small-cap Low price Low earnings High PE ST shares Low price hike in the previous period 1.Investors’ portfolio and trading preferences

9. Current Condition 2 ： Analysis of investor behavior 2. Investors’ Average Holding Period （ 1 ） Investors’ length of stock holding (%) Investor type (1000 yuan) 2007 0~3 months 3~12 months Over 1 year Under 100 81.428.5010.08 100-1000 83.9910.585.43 1000-5000 82.9812.314.71 5000-10000 81.7114.543.75 10000 or over 77.9318.403.67 Total82.428.329.25 （ 2 ） Investors’ length of stock holding ( days ） Investor type (1000 yuan)2007 Under 100 113.49 100-1000 76.40 1000-5000 74.93 5000-10000 74.13 10000 or over 80.17 Average holding peroid of individual investors105.77 Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

10. Current Condition 2 ： Analysis of investor behavior 3. Investors’ trading frequency and capital turnover Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

11. Current Condition 2 ： Analysis of investor behavior 4. Investors’ trading performance Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE Performance by Investor Type ( 10,000 yuan) Performance by Investors’ trading history

12. Current Condition 3 ： Test Analysis of Investor pressure Based on Feb 25 values, suppose the index fell 0%, 10%, 20%, 30%, the would-be gains and losses for investors: Investor types (In 1,000 yuan) Paper value of gains and losses （ % ） Losing accounts （ % ） Average balance （ 10,000 yuan) - 0%-10%- 20%-30-0%-10%-20%-30%-0%-10%-20%-30% Others1.82 -2.08-5.99-9.90 52.6258.0659.4759.980.08 -0.09-0.25-0.42 Under 10017.7213.599.455.3231.9637.5241.8445.320.880.670.470.26 100-100026.1921.4516.7211.9922.3827.6332.8337.8011.669.557.445.34 1000-500036.1530.9325.7220.5016.9121.2825.9230.68105.4790.2575.0459.83 5000-1000044.9439.3233.7028.0814.4218.6623.0327.29423.93370.90317.87264.84 Over 1000064.2456.5848.9341.2711.6615.5519.8924.381531.961349.401166.84984.28 Individual25.8821.1716.4611.7533.2638.7742.8546.142.992.451.901.36 Institutional62.7852.7142.6532.5915.5918.5320.7322.671112.64934.32756.00577.67 Source ： Shen Zhen Stock Market Investors Structure and Behavior, Year 2007, Financial Innovation Lab. and Research Institute, SZSE

13. Current Condition 4 ： Analysis of Annual Reports of Listed Companies on SZSE Absent of disclosure of senior manager and supervisors’ salary; Independent directors’ reports are trite and insubstantial. Disclosure of Internal control tends to superficially comply with forms and norms. Inaccurate or incomplete disclosure on the de facto controlling shareholder Less-than -expected observance of new accounting standards. More qualitative analysis, less quantitative analysis; more display of numbers, less analysis and explanation; Earnings forecast delayed and inaccurate;

14. From status quo to a better world Small and medium individual investors are the bulk of the investor population and provide most of the market liquidity. Small and medium investors tend to have high trading frequency, common style of investment and low investment returns. Close attention must be paid to systematic risk thus accumulated. Strengthen investor education and increase risk awareness in investors. Strengthen innovation in products and institutions, improve market liquidity and establish multiple channels of investment. Strengthen categorical trading account management practice and reinforce SZSE members’ trading management function. Improve quality of information disclosure and protect investors’ right to know.

15. SZSE ’ s Work The multiple dimensions of investor protection determines its complexity and systematic nature. Relationship with the trading entity Investors’ Identities Financial products/services consumers Shareholder Debt claimant Natural person/legal entity Client Trading entity Listed companies Securities firms Intermediary institutions Stock exchanges Depositary and clearing institution Fund for protection of investors’ interest Supervisory Institutions Fund companies

16. SZSE ’ s Work Trading entities Consumers of financial products and services. Shareholders and debt claimants Shareholders and debt claimants Natural persons and legal entities Clients of securities firms Protecting investors’ interests as …

17. Thank you