By Royston Chan
SHANGHAI, June 12 (Reuters) - Complaining that they had lost tens of thousands of dollars in the stock market, a small group of angry investors demonstrated outside the Shanghai Stock Exchange on Thursday as the market tumbled to new 14-month lows.
The public protest -- a rare event in China's big cities, where dissent is strictly controlled -- underlined fury and despair among China's millions of individual investors as the stock market crashes.
"More than 100 million investors have been buried in the ruins of the stock market by the earthquake in China's capital markets. Most of them are dying," read a text message widely circulated among mobile phones this week.
Police watched from nearby and security guards tried to stop a television cameraman from filming, but they did not interfere with the demonstration at the stock exchange. One protestor apparently fainted and was taken away in an ambulance.
Hit by tightening monetary policy and slowing corporate profit growth, the Shanghai Composite Index <.SSEC> sank 2.21 percent to a 14-month closing low on Thursday.
It has lost 11 percent in the past three days and 52 percent from last October's record peak. About $1.9 trillion of value in the Shanghai and Shenzhen markets has been erased since December.
Public anger over the crash, expressed in a slew of mobile phone text messages and postings in internet chat rooms, may affect economic policy and even have political implications as the government seeks to ensure the appearance of social harmony before the Beijing Olympics in August.
Much of investors' anger is aimed directly at the government officials overseeing the market, who encouraged a bull run last year and are therefore being blamed for its demise.
"Not only human beings but also the gods hate these worthless officials," wrote an anonymous investor on popular investment website guba.eastmoney.com.
Some investors hope the government will be pressured by the discontent into intervening to halt stocks' slide. But it be unable to do that without suspending its monetary tightening campaign -- and with inflation near 11-year highs, that could risk worse discontent down the road.
Whatever happens, authorities' hopes of building the market into a reliable funding source for companies may be set back if individual investors desert stocks for the long term.
"The problem is that in the current situation, people will just take profits on every rebound. More and more investors are likely to stay away from market for some time," said Chen Huiqin, analyst at Huatai Securities in Shanghai.
PROTEST
The group of about eight middle-class demonstrators at the Shanghai exchange on Thursday sat on the steps of the market's main building, one of them typing on his laptop computer, to protest losses suffered on warrants in China Southern Airlines.
A 28-year-old office worker who identified himself as Xu said he had lost 100,000 yuan ($14,500) in the stock market, about 20 months' salary for many Shanghai workers.
"Ninety-eight percent of small investors lost an arm and a leg. I don't know what I can do, so the only decision I can make now is to sit here," Xu said.
The protestors said they had lost money buying one-year put warrants in China Southern <580989.ss>, which more than quadrupled in price over six days to a peak of 1.35 yuan on June 2 but have since plunged to just 0.10 yuan.
The warrants can be exercised at a profit if China Southern's <600029.ss> share price over the 10n days before they expire on June 20 averages less than a strike price of 7.43 yuan.
But the airline's shares closed well above that level on Thursday, at 8.61 yuan, so the warrants look set to expire worthless. The protestors accused big institutional investors of artificially supporting the stock to make money at the expense of small investors.
Such debacles have contributed to a dramatic decrease in the flow of new investors into the market. Stock-focused mutual funds launched in the past few months have each drawn just a few hundred million yuan of subscriptions, compared to tens of billions of yuan in a single day during last year's bull run. (Writing by Andrew Torchia; Editing by Kim Coghill)
