“There’s no way I can lose”, say Chinese investors


Signs of euphoria among the nation’s investing masses are popping up everywhere
Chief Investment Office09 Jul 2020
Photo credit: AFP Photo


MAINLAND CHINA & HONG KONG

Like millions of amateur investors across China, Min Hang has become infatuated with the country’s surging stock market.

“There’s no way I can lose,” said the 36-year-old, who works at a technology start-up and opened her first trading account in Beijing on Tuesday (7 July). “Right now, I’m feeling invincible.”

Five years after China’s last big equity boom ended in tears, signs of euphoria among the nation’s investing masses are popping up everywhere. Turnover has soared, margin debt is rising at the fastest pace since 2015, and online trading platforms are struggling to keep up. Over the past seven days alone, Chinese stocks have added more than USD1t of value – far outpacing gains in every other market worldwide.

While it would be easy to dismiss as a replay of this year’s Robinhood rally in the US, China’s budding equity mania could in many ways be more consequential. Unlike in most major markets, the nation’s individual investors account for the lion’s share of local stock trading and have been prone to extreme swings in sentiment that can have ripple effects on the economy and monetary policy.

For now, indicators of market overheating are still comfortably below levels reached during the height of equity bubbles in 2007 and 2015. The risk is that breakneck gains – stoked in recent days by bullish articles in state-run media – could eventually result in a destabilising crash.

There are key differences between now and the start of the melt-up in 2014 for investors to consider, including a lower starting point for equity valuations. And while more traders are taking on debt to buy shares, leverage in the stock market is about 50% of what it was at its peak five years ago. Some investors say they are more cautious this year because of what happened before.

Stocks extended gains Wednesday, with the CSI 300 Index adding 1.6% in a move befitting Beijing’s call for a slow bull market. The Shanghai Composite Index climbed 1.74% to 3,403.44.

In 2014, encouraging words by state media helped revive interest in what had been a dull equity market. The result was a debt-fuelled speculative bubble that burst five years ago, wiping out USD5t of value. The fallout triggered regulatory clampdowns on speculative and insider trading.

Others do not see a repeat of 2015.

“Regulators will keep things in check to maintain a slow bull market,” said Roger Lin, a 45-year-old entrepreneur who runs a trading company in the southeast port city of Xiamen. “I’m confident that I’ll be able to exit just before the market slump,” he said. “You can do that as long as you’re not too greedy.” – Bloomberg News.

The Hang Seng Index rose 0.59% to 26,129.18.

 

REST OF ASIA

Philippine President Rodrigo Duterte said he will “have to be very circumspect in reopening the economy” given the spike in coronavirus cases, while his finance chief said that the nation need not choose between health and livelihood.

The firebrand leader said he cannot emulate the “devil-may-care attitude” of presidents Donald Trump of the US and Jair Bolsonaro of Brazil because the Philippines is poor. “We cannot afford really a total epidemic or pandemonium,” he said in an address on Wednesday (8 July), adding that economic reopening will be done gradually.

The Philippines will continue to limit the number of people that can go out, Duterte said, encouraging Filipinos to remain patient. The nation has the second highest number of infections in Southeast Asia after Indonesia, and has the fastest rise in cases since 1 June when the capital region reopened.

The president’s comments came after both Finance Secretary Carlos Dominguez and central bank Governor Benjamin Diokno backed a further easing of virus curbs to reignite an economy facing its deepest contraction in three decades.

The coronavirus cases in the country climbed by 1,540 to 47,873 on Tuesday, including 1,309 deaths. – Bloomberg News.

Australia’s S&P/ASX 200 Index opened 0.60% higher at 5,955.90 on Thursday, after losing 1.54% to 5,920.30 the previous session.

South Korea’s Kospi Index added 0.57% to 2,171.15 at the open on Thursday. It fell 0.24% to 2,158.88 on Wednesday.

The Taiwan Stock Exchange Weighted Index gained 0.64% to 12,170.19.

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