Shanghai Stock Exchange

Big rush of Chinese investors to local equity market


Investors in China are turning to mainland Chinese A shares as other investment options like real estate and cryptocurrencies come under tighter government scrutiny.

Stock trading volume across the local stock markets has held above 1 trillion yuan ($154.56 billion) for the last six weeks and hit a high for the year (1.71 trillion yuan) on Wednesday (Sept.1) , according to Shanghai-based Wind Information, a market leader in China’s financial information services industry.

That’s about twice the daily average trading volume of the last two years of 840 billion yuan, Wind Information’s data showed.

And on Wednesday, trading volume in the Chinese Shanghai Stock Exchange Composite Index alone was 842.2 billion yuan, the highest since summer 2015, when China’s rollercoaster stock market  crashed. From mid-June to early July of 2015, the benchmark plunged by 32%, wiping out more than RMB 18 trillion in share value from its 12th June peak. The value lost was equivalent to about 30% of China’s GDP in 2014 and about 20% of US GDP in 2014.

Fast forward to 2021, and Chinese authorities have announced a series of tough new measures that have had a major impact on large parts of the country’s private sector – from tech giants to tutoring firms and entertainment. Beijing has also intensified oversight of firms with share listings in the US.

Earlier this month, the Chinese government signalled that this crackdown would continue as it unveiled a five-year plan outlining tighter regulation of much of its economy.

“Markets may have become so focused on the regulatory storm that they ignore the elephant in the room: Beijing’s curbs on the property sector, which makes up one-quarter of China’s economy and half of the global construction business,” Ting Lu, Nomura’s chief China economist, said in an Aug. 24 report.

“Markets should be prepared for what could be a much worse-than-expected growth slowdown, more loan and bond defaults, and potential stock market turmoil,” he said.

Chinese President Xi Jinping on Thursday (Sept. 2) during a speech to the International Fair for Trade in Services, announced the formation of a Beijing Stock Exchange, as the country tries to lure domestic companies into listing at home instead of overseas. Xi did not give a date for the establishment of the new stock exchange or offer any further details, but said it would support the development of small and medium-sized enterprises

The nation currently has two main exchanges, in Shanghai and and the southern city of Shenzhen.