China’s day traders find solace in black humour as stocks languish in bear market territory
To understand Chinese investors’ exasperation with the stock market, take a look at the punchlines circulating online.
A husband’s most sincere vow of everlasting love? Promising he’ll only divorce his wife after recouping all trading losses. How do ambitious teens see themselves in 2035? Telling their brokers to buy the Shanghai Composite Index at 2,000 points - 30 per cent lower than its close on Monday at a level almost exactly the same as a decade ago.
Individual investors drive an estimated 85 per cent of the nation’s equity trades but some are now throwing in the towel as Chinese stocks languish in their eighth bear market in 10 years. Beyond investors’ bleak humour, pessimism is evident in the lowest market turnover in almost four years, a rally in bonds, the smallest mutual fund allocation to equities since at least 2003 and a slowing pace of new stock trading accounts.
Chinese equities have shed almost US$2 trillion since January on concerns that tightening credit conditions and a trade dispute with the US would derail China’s slowing economy. As a good start to the year quickly faded, waning interest from the country’s 141 million retail investors will deprive stocks of their biggest source of capital. Overseas investors own just 2 per cent of the market, according to UBS Group’s data.
“Stocks are not a very efficient investment in China,” said Li Wei, a freelance film screenwriter in southern China’s Kunming. He sold everything in January. “The problem with China’s stock market is that it is too young. It’s like a restless teenager.”