China's recent stock market rally driven by uneducated investors …
Two-thirds of new investors in China’s recent stock market rally didn’t finish high school according to economists at Bloomberg.
The Shanghai Composite Index, arguably the country’s most important stock market, has been on a roll since mid-2014 and shows no sign of stopping. This has puzzled economists given that China’s economy has of late shown some serious signs of weakness.
On Friday, Bloomberg economist Tom Orlik posted the following image to his Twitter account, potentially shedding light on what is fueling the Chinese equity bull market.
The data for Tom Orlik’s post comes from a quarterly national survey of household assets and income conducted by Gan Li of the Southwestern University of Finance and Economics. Figures indicate that 67.6% of all households who opened accounts in the past quarter haven’t even graduated from high school.
Speaking to Quartz, Orlik said “the significance of the relatively low education level of new investors, I think, is that it suggests relatively inexperienced retail investors are driving the rally. That underlines concerns that it’s a rally divorced from the fundamentals of profit and growth.”
The recent performance of the Shanghai Composite Index
For retail investors in China there are few options when it comes to finding a healthy return. With strict regulations preventing investment overseas and the real estate market looking bloated, it was only inevitable that money was going to be thrown at the stock market.
Previously on Shanghaiist:
China to accelerate reform and opening up of the renminbi
China surpasses Japan as world’s second-largest stock market
Free trade zone speculation fuels 275 billion yuan bubble for stocks with ‘Shanghai’ in name
[Graph via Yahoo Finance]
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China's recent stock market rally driven by uneducated investors …
