One chart sums up the frenzy in China's stock market
May 1, 2015, 2:37 AM
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China’s stock market has exploded over the last year — over the last 16 months, in fact, the Shanghai Composite Index has more than doubled.Activity has been particularly frenetic in the first few months of this year, and stocks are up by 37% since January 1. That’s driven by an absolutely enormous wave of new stock accounts and a boom in turnover that has outstripped previous years by a mile.Here’s a chart from Oxford Economics showing just that:Oxford Economics
That may not be a good thing for Chinese markets in the long term. Here’s Oxford Economics discussing the boom in investor numbers:
The composition of investors in Chinese equity markets may explain why stocks are rising so quickly: less than 2% of mainland stocks are held by foreigners and individual investors account for around 90% of turnover on equity markets.
As prices continue to rise, the prospect of quick gains has attracted new investors to the market. A study from the China Household Finance Survey found that 5% of new entrants over the past year were illiterate and that 25% had only received elementary schooling.
The analysts don’t make a prediction of when the market might turn, but the note is fittingly titled “What goes up…”
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One chart sums up the frenzy in China's stock market
