- July’s new A-share trading accounts more than doubled from last year to 2.43 million, according to data by the China Securities Depository and Clearing
- That raised the total to 170.2 million accounts as of July 31, making it the world’s eighth-largest cluster of people, more than the population of Bangladesh and just behind Nigeria
The Chinese population is continuing its headlong plunge into the stock market, a second monthly surge that sustains the momentum behind one of the world’s best-performing major benchmarks this year.July’s new A-share trading accounts more than doubled from last year to 2.43 million, according to data by the China Securities Depository and Clearing (CSDC).
That raised the total to 170.2 million accounts as of July 31, making it the world’s eighth largest cluster of people, more than the population of Bangladesh and just behind Nigeria.
While new stock accounts give legs to the bull market, having so many first-time investors – retail traders make up an estimated 70 per cent of China’s stock transactions – raise the political and socioeconomic stakes for the authorities, forcing them to do all they can to sustain prices and avoid scaring traders. Unlike markets elsewhere, short-selling is severely curtailed and offers very limited use to hedge against declines in China, which would almost certainly translate to a financial catastrophe in the event of the 2015 market rout that wiped out US$5 trillion.
“The big number of new investors reflects the influx of fresh funds, which would sustain the market for a while,” said Ding Haifeng, a consultant with Shanghai-based financial advisory firm Integrity. “After all, strong runs on China’s stock market were often driven by speculative capital, rather than economic and company fundamentals.”
For now, sage advice for restraint appear to have fallen on deaf ears, as the Shanghai Composite Index’s 11 per cent jump this year put it behind Copenhagen’s OMX20 and Buenos Aires’ Merval as the world’s third-best performing major index. In the first six months, 7.98 million new equity trading accounts were added on the Shanghai and Shenzhen stock exchanges, data showed.
Bullish sentiments in China were boosted by an economy that reversed the first quarter’s contraction with a 3.2 per cent growth from April to June, as output and consumption creaked back into life in the first major country to emerge from its coronavirus lockdown.