China's stock market rebounded slightly on Thursday, slowing a massive selloff that has erased trillions of yuan of value in recent weeks. The crash and subsequent measures to slow the losses have emphasized how different the Chinese stock market—which was established in the early s—is from its American counterpart.
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Unlike many of the world's stock markets, most trades on the Chinese stock market are made by individual retail investors, rather than institutional investors. About 85 percent of trades are retail, according to Reuters. China 's approximately million retail investors trade more often than any other investors on Earth—81 percent said they trade at least once a month, compared with 53 percent in the U.
S, according to a recent survey by State Street. That's alarming considering that another survey found more than two-thirds of the most recent batch of new investors didn't even graduate from high school—and many seem to be investing with borrowed money based on faith in the central government. More than 30 million new trading accounts were added in the first five months ofaccording to data from the China Securities Depository and Clearing Corp. That's more than the population of Texas, and three times as much as were added in all of Trade volumes have also reached new highs recently.
As of May, the latest data available, those volumes were set to more than double last year's total and to set a record for the two exchanges.
People quitting their jobs to be day traders? I have staff that quit their jobs to do day trading. All that enthusiastic day trading explains the recent stock market boom despite weak economic growth and the Chinese market's unique volatility.
While institutional investors can probably be counted on to take a long view, the power of retail investors in China's market may not bode well for the government's attempts to halt the panic. Freezing new initial public offerings on the Shanghai and Shenzhen stock exchanges was once of the first of many efforts by the People's Bank of China —including lowering interest rates and bank reserve requirements, making brokerages buy stocks and allowing homes to be used as collateral—that have failed to stop the market's slide.
China has a long history of controlling IPO greatest option trades to stabilize its fledgling stock markets. This freeze is the ninth since Chinese IPOs are often hugely underpriced. According to one studythey average first-day returns of percent, compared with around 17 percent for U. IPOs and around 30 percent for other emerging economies.
Earlier IPOs were underpriced by an average of percent. Those massive IPOs can lock up capital and draw money out of existing stocks. Freezing offerings is a step toward maintaining liquidity in a struggling market. Some investors blame a wave of IPOs in June for causing the current crisis. Days after the market peaked, Shanghai saw its biggest IPO in five years at China's stock market tends not to correlate with other world best way to make money in wow 5.0.4, and less than 2 percent of Chinese shares are owned by foreigners.
China restricts foreign capital in its mainland exchanges, and most international exposure to Chinese companies takes place through listings on the more open Hong Kong exchange. The few foreign buyers who were directly invested in the mainland market seemed to have seen the mania in the market long before it turned to panic. While Chinese companies listed in Hong Kong have lost value in the past few days, those stocks did not stock market drops china the same huge gains and losses as on the Chinese market.
The bigger risk for foreign investors is that stock market crash dotcom bubble stock market crash in China will precipitate wider economic problems. China is still the world's largest economy, and the strife there could spill over into connected economies like the U.
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Register Log In Profile Email Preferences PRO Sign Out. Three charts explaining China's strange stock market Mark Fahey Eric Chemi. Everyday Chinese citizens dominate the market Unlike many of the world's stock markets, most trades on the Chinese stock market are made by individual retail investors, rather than institutional investors.
China's IPOs can move the market Freezing new initial public offerings on the Shanghai and Shenzhen stock exchanges was once of the first of many efforts by the People's Bank of China —including lowering interest rates and bank reserve requirements, making brokerages buy stocks and allowing homes to be used as collateral—that have failed to stop the market's slide. China's market is insulated from world markets China's stock market tends not to correlate with other world markets, and less than 2 percent of Chinese shares are owned by foreigners.
Mark Fahey Data Journalist.
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