A Chinese bank worker counts yuan notes at a bank in Huabei, east China’s Anhui Province, July 6, 2012.
Ji Zhao. Corbis News | Getty Images
BEIJING – Chinese investors look to the local stock market as lucrative options such as real estate and cryptocurrencies have come under scrutiny by the government.
Since the end of July, the daily trading volume of mainland China A shares has exceeded 1,000 billion yuan ($ 154.56 billion) and climbed to 1,710 billion yuan on Wednesday, according to Wind Information.
Data show that this is almost double the daily average trade volume of 840 billion yuan in the past two years.
And on Wednesday, the Shanghai Composite alone recorded a trading volume of 842.2 billion yuan, the highest since July 2015, as the Chinese stock market collapsed amid speculation at the peak of the year. summer.
Six years later, this summer has been one of China’s most intense government regulations affecting the tech and education sectors. An underlying political call for “common prosperity” – moderate wealth for all rather than some – emerged as Beijing’s impetus for these new policies.
Nomura’s chief economist in China, Ting Lu, expects this new political push to reduce wealth inequality to be felt mostly in real estate.
Rising house prices over the past few decades have sparked significant speculation and created a financial burden for families trying to buy a home in an area with a good school or a job nearby. Chinese authorities have insisted over the years that “homes are made for living, not for speculation” and have restricted the ability of real estate developers to build new homes with high levels of debt.
“Market regulators can be so focused on the storm that they overlook the elephant in the room: Beijing’s embargo on the real estate sector, which accounts for a quarter of China’s economy and half of the world’s real estate industry. construction, ”Lu said. Says 24 reports Aug. 1.
“Markets need to be prepared for a worse than expected growth slowdown, increased debt and bond defaults and potential stock market volatility,” he said.
short-term stock trading
According to Noah Research, in 2018, around 65% of Chinese private household assets were real estate, compared to 49% in the United States. This means that a lot of Chinese capital could enter the stock.
“The real estate speculation is definitely out of the question,” said Sheling Xie, senior analyst at Stanberry China, in Mandarin, according to the CNBC translation. Since Chinese authorities banned cryptocurrency transactions this year, “Where is this money going? “
He expects more money to flow into the stock market, especially given the uncertainty over economic growth. Investors expect monetary policy to ease, allowing more capital to flow.
The continental stock market, the second largest in the world, has grown significantly since the 2015 crash and has attracted many institutional investors. But the behavior of speculative retail investors persists in the stock market, with many comparing it to casinos.
During the last increase in trading volume, many investors switched from a long-term perspective to a short-term perspective, as it is “not that hard” to ride some lesser-known stocks higher though. a trader is “sensitive enough”. Xie said.
Growing investor interest has affected Chinese stock indices differently. This week, the Shanghai Composite is on track to gain more than 2%, while the Shenzhen Composite is little changed and the Star 50 is down more than 5%.
Chaoping Zhu, Global Market Strategist at JPMorgan Asset Management, said, “The recent high transaction volume is mainly due to sector rotation. In the face of lingering market uncertainties, investors are selling high valued and undervalued growth stocks. They buy defensive areas.
“For example, undervalued blue chips in the banking, securities and asset sectors are attracting large inflows,” he said, adding that quantitative trading has also increased recently.