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China stock market rally: China too sees new investors drive up its equity indices all of this week


Many analysts on Dalal Street believe the current stocks rally is being driven led by new investors, who have bought equities for the first time. Apparently, the phenomenon is not limited to India.

The same story is playing out even in trans-Himalayan neighbour China. Just a look at the five-day chart of China’s CSI 300 Index and internet search trends reveals newer investors are partly responsible for its 12 per cent surge in last five days. In last 16 sessions, the index has closed in the red just once.

Low interest rates and steep losses in popular wealth management products, including guaranteed return plans issued by the country’s state banks, are driving Chinese savers to stocks. “The behaviour is also being aided by an enthusiastic chorus from the nation’s state media,” said Garima Kapoor, Economist for Institutional Equities at Elara Capital.

A Bloomberg report said after an endorsement of the bull market in a frontpage editorial in the China Securities Journal, Chinese social media exploded with searches for the term ‘open a stock account’, indicating increased interest among retail investors.

Kapoor said similar trends have been seen in other markets as well. Some 1,46,250 people opened new trading accounts in Thailand for the first time this year through May, according to data from the Stock Exchange of Thailand. That exceeded the total number of new stock investors for all of 2019.

In the US, where benchmark indices have jumped over 40 per cent from March lows thanks to tech stocks, brokerages like Charles Schwab, Interactive Brokers and TD Ameritrade have added more than 1 million new accounts in the first quarter, a 4 per cent rise from the previous period. A year ago, that increase was about 1 per cent.

Some of the Indian analysts have called them ‘Robinhood’ investors, especially because they seem to be showing a preference for penny stocks, many of which have seen exponential rise in recent times due to demand from newer investors.

“No wonder market veterans are surprised by the rally in frontline stocks, but the underlying reason driving the stocks higher can be deciphered from this strange movement in penny stocks. It is further surprising that this trend of penny stock buying is visible also in the US and other market. It is the retail investors (Indian version of Robinhood traders), who are betting on these stocks from the lockdown confinement of their homes,” Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote said in a note over the weekend.

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