After the week-long National Day holiday, the Chinese stock market has experienced roller-coaster fluctuations, with investors gradually reducing their holdings of risky assets. For the new generation of young individual investors who rush into the market, they may unfortunately become the next generation trapped in losses.
“There is absolutely no intention to harvest the masses, please rest assured, this time we are uprooting the leeks,” said an internet user.
An analysis of the trend of A-shares circulating on the internet in China suggests that in the overall economic depression across various industries in the country, with enormous savings still held by the common people, coupled with opaque information and a government controlling the media and financial institutions without much concern for the well-being of the people, turning A-shares into a “harvesting tool” is an inevitable outcome that can be anticipated.
Many older-generation stock investors still vividly remember the stock market crash of 2015. Back then, the Shanghai Composite Index surged to an all-time high in June but plummeted nearly 40% within a month. The bullish market and subsequent crash were closely related to policy announcements from the Chinese Communist Party (CCP).
It is reported that many young people have entered the market by leveraging online stock trading platforms such as Futu and Snowball. These platforms allow registration and trading within one to two days. Additionally, Tiger Brokers also provides trading services for Chinese stocks listed in Hong Kong to investors. The company stated that within a few days following CCP announcements, the number of users under 31 increased by 77% compared to the previous week.
Data from information provider Wind shows that since the announcement of the monetary stimulus plan on September 24, retail stock purchases have surged, with nearly 300 million yuan being purchased on October 8 alone. Goldman Sachs’ sentiment tracking data indicates that within six trading days, the number of novice investors requiring a margin of 500,000 yuan increased by 30,000.
China has approximately 200 million individual investors, as investment opportunities within the country are very limited, with few overseas investment opportunities available to them.
Chinese financial media outlet “Daily Economic News” reported that since the announcement of various stimuli by the People’s Bank of China at the end of September, A-shares have seen record-breaking trading volumes for consecutive days, attracting new investors to rush into the market. This led to securities firms in many regions extending working hours, working even during the seven-day National Day holiday and weekends.
A client manager at a securities exchange in Northeast China mentioned that during this flurry of buying, he received numerous inquiries from novice investors. Even university students were studying investment advice during the National Day holiday.
For Chinese people born after the early 20th century, this investment frenzy is filled with allure, as this generation has been facing economic stagnation since reaching adulthood. Despite understanding the risks of stock market investments, they fear missing out on an investment “opportunity”.
According to BBC Chinese, Moody’s analysis report states that the CCP’s choice to announce multiple measures concurrently rather than in stages has collectively heightened market expectations.
The Chinese economy has been ailing since the Covid pandemic. In August, youth unemployment rates rose for the second consecutive month, reaching the highest level of the year. Due to the poor performance of previous unemployment indicators, the government no longer discloses this data, as the results of using new image indicators have been unsatisfactory.
Until recently, the Chinese stock market remained one of the poorest-performing markets globally.
In September, the CCP Politburo unexpectedly convened an economic conference, claiming to achieve the established annual economic goals and prevent the downturn of the real estate market. So far, there has been no concrete evidence of the CCP truly striving to revive the economy.
Analysts unanimously agree that the continued stagnation of domestic demand in China is at the heart of the economic problem, leaving many disappointed with the measures in the latest stimulus plan issued by Beijing.
Some commentators believe this is partially due to the ideological stance of the CCP leadership, as they oppose distributing welfare and providing direct assistance to consumers.
However, with the introduction of this series of stimulus measures, the Chinese stock market suddenly began to soar and marked its largest weekly gain in nearly 16 years. On September 26, trading volumes were so high that the Shanghai Stock Exchange experienced delays.
When the market reopened on October 8 after a week-long holiday, stocks on the mainland initially surged by over 10%, before retracting slightly to close up nearly 6%. This marked the tenth consecutive trading day of gains. However, the market saw a significant drop on the 9th, with a decline exceeding 7%. The CSI 300 Index’s decline this week expanded to around 2.1%.
A banker from Anhui province informed the Financial Times that these government fiscal stimulus measures will not bring long-lasting benefits.
“This shows the world how good the Chinese stock market looks and how prosperous the Chinese economy appears, but in the end, it is all about harvesting leeks. Who is being sheared? The small individual investors in China,” stated the banker.
Some analysts also question the effectiveness of the fiscal stimulus measures themselves and point out that Beijing needs to undertake structural reforms to revive consumer confidence.
“I have a plan to keep A-shares soaring and stimulate the economy. Publicize all officials’ and their immediate family’s entire assets, but the portion flowing into A-shares does not need to be disclosed,” joked an internet user on social media.
Recently, videos circulating online showing stock investors who have become trapped in losses and choosing to end their lives due to significant losses have prompted many to sigh and reflect.
“Remember: regardless of bankruptcy, always keep 3,000 yuan as spare cash to buy an electric car for food delivery,” reminded an internet user on social media in a poignant manner.