If you are not aware of China’s booming stock market, it is time you get familiarized with it!
Starting March 2015 to April 2015, the number of trading accounts opened in China is a crazy number in millions. In the last week of April 2015 itself, the total number of A-Share accounts opened was 3.25 million!!
A-Shares are traded on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are generally only available for purchase by mainland citizens, quoted in Chinese renminbi. B-shares are quoted in foreign currency such as USD and open to foreign investments. Both these markets have performed extremely well.
There are many regulatory moves and economic changes which have resulted in such a boom in Chinese markets:
- Government is promoting and supporting equity markets by cutting the interest rates
- Financial reforms have been introduced such as Hong Kong Stock Connect
- With the growth in the economy, Chinese people have money to invest in stock markets. A high percentage of those A-share traders are not college graduates.
- Foreign banks such as JP Morgan Chase and Nomura Holdings are getting permission to trade A-shares
- China’s central bank have pumped billions of yuan into the financial system
- Margin lending has more than tripled in 2014 to a record 1.7 trillion yuan ($274.6 billion). Trading funded by margin loans accounts for 25% of daily volume on the ChiNext, the market in Shenzhen where Chinese startups trade, according to estimates from UBS AG.
Though a lot of foreign investments are eyeing Chinese markets and are bullish on further growths, many are skeptical and see the current scenario as bubble created by Chinese financial institutions. In the light of China’s demographic problem with lower fertility rate, population growing older and wages improved, critics are arguing against China’s economic growth patterns. However, the international investors believe that the Chinese stock markets will continue to grow despite economic deceleration. This is due to the expectation that Chinese government policies would force state owned oil and banking companies to go public.
Amidst lots of speculation and rumours, fact remains that a lot of investors are getting more and more attracted to the lucrative Chinese markets and we do not see that interest going away anytime in near future!