SHANGHAI – China’s 200 million-strong army of retail investors was supposed to help the market turn a corner. Instead, it has become a source of weakness.
The country’s US$9.7 trillion (S$12.7 trillion) stock market experienced a rapid boom and bust starting in late September, when central bank stimulus pushed the benchmark CSI 300 Index 25 per cent higher in five days of trading. Many small investors who came late to the party were caught out when equities then slumped, and were forced to beat a hasty retreat.
“Close securities account” as a phrase cropped up 56 million times on social media platform WeChat on Oct 9, as the benchmark index posted its worst performance since 2020. Money soon shifted back into savings from stock trading accounts, according to a bank index. Retail investors took to social media to lament their losses, with one user on Xiaohongshu saying “the stock market is really not suitable for a novice like me”.
The abrupt shift in sentiment has undermined hopes among bulls that China’s huge retail investor base, sitting on US$21 trillion (S$28 trillion) of deposits, will help drive a long-term rally. Whipped by social media, small investors have instead proven fickle, turning a positive – the ability to quickly deploy capital to the stock market – into a negative, as they exacerbated price swings.
Mr Shelton Wang, a 32-year-old technology sector worker in Beijing, was one of the many who succumbed to the euphoria, making “impulsive” transfers into his trading account after the initial surge. Having seen stock prices plunge after a one-week public holiday, he pulled back.
“Everybody was talking about it – the policy outlook and the cheap Chinese valuation – and you saw it everywhere on social media,” he said. “The market’s plunge calmed me a bit and
