China's raging stock market is luring students looking to see how their textbook teachings fare in real life. But while this may lead to valuable investment experience, it may also be putting family assets at risk.

Student investors are part of the retail-investor craze in China that analysts say has helped power the benchmark Shanghai Composite Index to a 62% gain so far this year. The index finished at a record 4346.46 Thursday.

While there are no concrete data on the student-investor population, business professors and students say the market boom has boosted the number of students looking to play around with stocks -- often with money from parents and sometimes with amounts equal to several times the students' annual tuition.

While students in other countries may not have much cash backing, events in China's history have resulted in families sometimes placing their youngest members in charge of family money.

'As many parents see the market as a way to make fast money, when their kids ask for money for stock investments, they often tend to give them the money to try,' said Hao Guomei, an analyst at Huatai Securities. 'Many parents who don't have a good education because of the Cultural Revolution tend to trust their kids who go to college and believe their kids can help bring money to the family.'

But being young and bold doesn't necessarily mean being a smart investor.

Chen Xiao, a university student in Shanghai, invested 5,000 yuan, or about $660, the equivalent of his tuition for a year, in the stock market in March. The money was from his parents. He bought stocks even at a relatively high price, hoping they would rise more.

'Seeing other people making a lot of money from the stock market, I thought I should give it a try too,' Mr. Chen said. 'Basically I followed other veteran investors or my friends to buy or sell stocks.'

But then came the painful reversal of late May and early June, when Beijing tripled a trading tax and the Shanghai index sank 15% over four sessions. That left Mr. Chen's investment worth just 2500 yuan. 'I consider the loss as a lesson I learned from the stock market,' he said.

Su Tonghua, a finance professor at a major Shanghai university who has been teaching since 1995, is alarmed at the trend. 'I always encourage my students to practice in the stock club, as investing with real money involves many risks, and college students are very likely to lose in the real world.' He estimates about 50% of his business majors are investing in the stock market.

As in many other countries, colleges in China have long had stock clubs, where students make hypothetical investments in the stock market to learn about the process. Such clubs mostly started around 1997, and fake money is used. But despite the stock market rise in China, the clubs aren't so active, said Mr. Su.

Still, while few retail investors buy stocks based on corporate fundamentals and markets remain immature, some students rigorously apply financial analysis learned in the classroom to their investments.

'As my mother had a huge loss in the last market boom, I didn't want to follow her ways of investing,' said Zhu Xunan, who just finished his first year in college. Mr. Zhu said he never invested in a stock on a tip from the media or friends but always did his own analysis.

His parents gave him 20,000 yuan to invest in the stock market last July. He has managed to make 4,000 yuan, vastly underperforming the market but still not burning through his family's savings.
(WSJ.COM)