Investors’ High Spirits Lead to Rising Stock Market
The rising rate of Shanghai Stock Exchange (SSE) composite index in 2015Q1 was up to 13.7%. The index was at 4,000 points on Apr. 10. The turnover of the stock markets of SSE and Shenzhen Stock Exchange (SZSE) on Apr. 20 reached 1.8 trillion, becoming the highest value of world exchange. According to the data, CHFS where the author is employed timely understood and predicted the recent changes of the stock market through the telephone interview with households in 2015Q1.
As of 2015Q1, the stock market participation rate of Chinese households reached 6.1%, and 30.7% of them opened account in the second half of 2013. New investors were characterized by younger tendency, less property and academic polarization, and the post-80s and post-90s were fresh blood in the stock market. In addition, the enthusiasm of the households in underdeveloped areas in participating in the stock market was gradually rising. The old stock householders younger than 30 years old only accounted for 1.8%, while the new stock householders younger than 30 years old accounted for 12.6%; the old stock households without property accounted for 4.9%, while the proportion for new stock households was up to 18.5%. The popularity of the stock market spread to third- and fourth-tier cities. 32.4% of old stock households were distributed in other areas than first- and second-tier cities, but the proportion for new stock households was up to 37.8%.
The increasing turnover was supported by the new funds. 30.6% of stock households increased their investment fund in the stock market in 2015Q1. 4.8% of them said that they increased a lot of stock fund. Only 8.9% of the households said they decreased investment fund in the stock market.
The rising stock market was really reflected in the earnings and loss of stock households. The overall earnings ratio of stock households in 2013 was only 15.8%; while the ratio in 2015Q1 reached 76.6%: 78.4% of old investors and 72.5% of new investors earned money. The earnings ratio of stock households owning more stocks was relatively higher. The earnings ratio of stock households owning 4 stocks was 84.8%, which is much higher than that of stock households owning less than 3 stocks, 74.4%. Do not invest all funds in one stock, even in bull market.
Chinese culture is featured with the tradition of “spreading only the good news but not the bad”. We have heard more about stories about earning money in the stock market. According to the data, more households were talking about stocks; the frequency for talking about stocks in Mar. was higher than that in Feb. for 12.7% of the households investing in stocks. 33.9% of the households held that they talked about stocks slightly more frequently; only 6.4% of the households talked about stocks less frequently.
The expectations of the investors and the common people (71.520, -0.90, -1.24%) were an important factor for the subsequent trend of the stock market. Even though the government and economists were extremely worried about the current macroeconomic situation, the interviewees were generally optimistic. The macroeconomic expectations index was 120.18, while that of stock households was 124.0, which was more optimistic. In terms of stock market expectations, the index of the common people was 113.3; and that of stock households reached 133.9. The following households were more optimistic about the expectations: old investors, households with a householder having university education background, households with multiple homes, and those earned money in the stock market in 2015Q1.
With regard to investment orientation, new investors were more apt to invest in SME stocks, GEM and overseas stocks; while households with earnings were more apt to invest in main board stock. In terms of stock plan, only 22.1% of the investors had stock increase plan. Old investors, households with a householder having university education background and those earned money in the stock market in 2015Q1 were slightly optimistic about stock increase plan. It seemed that even though the investors had strong stock market expectations, they were quite cautious in stock increase.
Finally, CHFS constructed an investor sentiment index with these sampling survey data and in combination with the data on the number of newly opened stock accounts and turnover rate in the stock markets of SSE and SZSE. In the bull market in 2015Q1, the investor sentiment index was 121.0, showing that the investors were in high spirits.
According to the data above, I hold that the stock market will keep rising in the near future.