Mainland investors trade for ‘short-term fun’, reveals new study

State Street finds Chinese investors have the second highest ‘love of money’ of 20 countries surveyed, only beaten by India

PUBLISHED : Sunday, 25 September, 2016, 3:10pm
UPDATED : Sunday, 25 September, 2016, 8:31pm

China’s retail investors trade in financial markets in different ways than their equivalents elsewhere in the world, even in Hong Kong, according to newly released research from State Street.

The company’s “Love of Money” survey reveals 63 per cent of mainland respondents said when making their investments they did not worry about saving for later in life, while the figure dropped to just 27 per cent in Hong Kong, and 29 per cent of respondents globally.

“There is a fundamental difference between China and the rest of the world in how people view the stock market,” said Sam Humbert, a Hong Kong-based researcher at State Street’s Centre for Applied Research.

“Globally people tend to see it as a way to invest for the long term, whereas in China, what investors are telling us is that they invest because they enjoy trading.”

Just under half (48 per cent) of those surveyed in China traded in financial markets at least once a week, compared to just 29 per cent of respondents in Hong Kong.

“Because investors in China are more likely to invest for fun, it makes sense that you see a much higher frequency of trading activity,” Humbert said.

The survey also found that the number of investors in China who liked talking about money was higher than anywhere else, at 83 per cent of respondents, and that a higher proportion of investors in the mainland (75 per cent) said that they saw money as a symbol of success, compared to just 48 per cent of investors in Hong Kong.

Because investors in China are more likely to invest for fun, it makes sense that you see a much higher frequency of trading activity
Sam Humbert, researcher at State Street’s Centre for Applied Research

Overall State Street found investors in China had the second highest “love of money” of the 20 countries surveyed, only beaten by India. Hong Kong was ranked seventh.

Asia-Pacific posted higher scores than North America and Europe, though Humbert noted there were a number of factors driving this, as investors in Europe might find it culturally inappropriate to talk about money in such a way.

However, according to the research, investors in China and globally whose responses demonstrated a “high love of money” actually saw worse financial outcomes than those who were less driven by money.

The survey, carried out in the early part of this year, is the first of its type by State Street, making it impossible to judge the impact of last year’s high levels of market volatility on Chinese investors.

“This kind of market turbulence can often lead to a lack of trust in the industry, but maybe this would play out differently in China,” Humbert said.

“If people invest because they enjoy it, does a stock market plunge make them run away from the market, or does it make it more fun?”

For one investor, at least, that does not seem to be the case. Ryan Cai, a Shanghai resident, who last year was one of the many thousands of retail investors trading in stocks, told the South China Morning Post, that “now the market is flatter I don’t have any passion for the stock market, and I only look at the shares I bought once or twice a week”.

“Currently, I am investing in property instead, and won’t stop until house prices in Shanghai reach the same level as Hong Kong,” Cai said.