Reform and Opening Up? A Look at China’s Financial Markets
More and more Chinese investors are investing in the local stock market.
According to the China Securities Depository and Clearing, there were 1.62 million new investors registered in the mainland stock market in December, double the 809.3 thousand reported a year ago. The organization trades on the Shanghai and Shenzhen stock exchanges.
The data showed that for the whole of 2020, the number of new investors increased by 18.02 million to 177.77 million.This is approximately 1.5 million new accounts per month..
The surge in interest is fueled by the fact that many people around the world have turned to stock trading, stuck at home due to the coronavirus pandemic..
New investor accounts in China come after mainland stocks soared last year, some of which were the best in the world..
For example, Shenzhen component grew 38.7% and CSI 300 grew 27.2% in 2020, up from 16.26% growth for S&P 500. CSI 300 tracks stocks of the top 300 listed companies in Shanghai and Shenzhen.
Investors could also choose from more Chinese companies as new listings flooded the market.
According to Ernst & Young, mainland China and Hong Kong accounted for 40% of global IPOs last year.
The study said the Shanghai Stock Exchange, with its main floor and Star market, ranked first in the world with 233 IPOs, adding that Shenzhen came in third just behind Nasdaq in New York..
Chinese investors have also been eager to buy shares in Hong Kong, where many of China’s largest and most popular companies, such as Tencent and Meituan, are listed. Other companies like JD.com did secondary listings in Hong Kong last year.
The Chinese government wants to keep its «champions» countries closer to home. Political pressure on Chinese companies to squeeze them out of US markets intensified last year..
Reflecting interest in Chinese stocks listed on the Hong Kong Stock Exchange, Wind Information data showed that net purchases under the Shanghai program «connect» more than doubled from last year to HK $ 334 billion ($ 43.09 billion). Meanwhile, purchases under the same program in Shenzhen more than tripled to HK $ 338.11 billion..
Stock exchange programs launched in the last five years allow mainland investors to trade certain stocks in Hong Kong.
In contrast, net purchases of Shenzhen and Shanghai shares in Hong Kong declined slightly in 2020, according to Wind.
China’s interest in local stocks has remained strong this year, according to Wind, with trading volume in mainland-listed Category A stocks exceeding 1 billion yuan ($ 154.32 million) in 11 of the 13 first trading days of 2021. We are talking about RMB-denominated shares of Chinese companies traded on the mainland exchanges of Shenzhen or Shanghai.
Chinese markets have seen significant growth this year.
Shanghai’s composite index surpassed the psychologically important level of 3,600, hitting a five-year high on Thursday, while the Shenzhen component is up another 7% this year from its 2020 gain. Meanwhile, the CSI 300 has skyrocketed to levels not seen since January 2008..