An interesting piece from Reuters highlights how retail investors have joined efforts to keep China’s stock market stable.
Amid the trade war between America and China, the news agency has spoken to small-time investors, some wading into the market for the first time, who are vowing to hold on to stocks in a show of patriotism, rather than seeking a windfall.
It comes as Chinese exchange-traded funds (ETFs) received record inflows of cash from state-backed buyers, with nearly $US24 billion ($37 billion) flowing in during the week starting April 7, according to Bloomberg.
Cao Mingjie had never traded stocks before Donald Trump’s “Liberation Day”.
The home designer from China’s southern Guangdong province changed his mind after April 2, when the US president announced “reciprocal tariffs”, intensifying a trade war with his country.
Keen to show solidarity with Beijing, Cao decided he would invest 2,000 yuan ($426) in the local stock market every month.
“The goal isn’t to make money. It’s about contributing to my country,” said Cao. He said he opened trading accounts after the higher tariffs hit Chinese stocks.
In this trade war, “every individual should stand by the country until the end”.
Like Cao, many retail investors are joining the state-backed “national team” to defend the stock market — another battlefield in the broadening Sino-US conflict, traders and brokers say.
Buying has been focused on sectors set to benefit from China’s national agenda, such as defence, consumer and semiconductors.
The patriotic fervour is unusual in small investors, notorious for their casino mentality, and a welcome change for authorities seeking to counter the panic caused by the trade war and stabilise capital markets.
Since the rout on April 4, China’s share markets have received 45 billion yuan in net retail inflows, data from financial information provider Datayes shows.
That compares with six straight sessions of outflows totalling 91.8 billion yuan ahead of Trump’s “Liberation Day”.
Previously, private and state investors clashed during the 2015 market crash and in the aftermath of Beijing’s crackdown of technology companies, undermining market rescue efforts.
But now, their interests appear aligned as Trump threatens eye-popping import tariffs that China has described as “bullying”, even if some retail investors are merely opportunistic and riding on Beijing’s swift and resolute intervention.
As China stocks plunged 7% on April 7, state-backed institutional investors publicly vowed to buy more shares, top Chinese brokerages pledged to steady prices, and a slew of listed companies unveiled share buyback plans.
Last week, Chinese Premier Li Qiang urged government officials to strengthen efforts to steady the stock market.
China’s stock market, the Shangahi Composite, has bounced 8% from seven-month lows hit early April, and is down just 1.3% so far this month.
That compares with a slump of more than 8% for US stocks on the S&P 500.
“We think China’s A-share market is of greater strategic importance,” said Meng Lei, China equity strategist at UBS Securities.
Patriotic bets have “meaningfully improved investor sentiment”, Meng said.
