Buying frenzy takes China’s stock market close to US$10 trillion – the ominous milestone that marked the start of the 2015 crash
- A bigger stock market may bolster the appeal of mainland equities at a time overseas investors have been buying up onshore yuan-denominated assets
- New listings, rather than existing price moves, will determine when exactly market cap reaches US$10 trillion, says Ken Chen Hao, of Securities
China’s stock market is closing in on a major milestone: US$10 trillion in capitalisation.
It has reached that level once before. That was in June 2015, and the spectacular implosion that followed when regulators moved to stamp out a debt-fuelled buying spree still haunts traders and investors today.
The total value of the shares trading on the Shanghai and Shenzhen exchanges rose to as much as US$9.7 trillion this week, according to Bloomberg data, amid a buying frenzy that quickly ramped up stock prices.
A bigger stock market will bolster the appeal of mainland-traded equities at a time when China is opening up more of its capital to the outside world and overseas investors have been increasingly boosting their allocations of onshore yuan-denominated assets. Foreign traders held over 2 trillion yuan (US$285.8 billion) of Chinese stocks by the end of April, making up 8.6 per cent of the free-floating shares of listed companies trading on the onshore market, according to China Merchant Securities.
“The size does matter to investors, particularly the overseas ones,” said Ken Chen Hao, a strategist at KGI Securities in Shanghai. “For them, a big enough market means less volatility and less chance that stocks are subjected to manipulation. That’ll ensure the fairness of the market and increase willingness to trade.”