Column: Equity arena more mature
ered gradually from the low level in 2016 and is now traded in a tighter band around 3,300 points.
The steady rise has generally been led by the gains in blue-chip stocks rather than overvalued small-caps. Most analysts believe market valuations are still reasonable and safe to trade.
The less speculative environment has also to do with the regulator’s tougher crackdown on manipulation and illegal leveraged trading to curb systemic financial risks. There has been more emphasis on greater transparency of listed companies with proper information disclosure and better corporate governance.
Muted enthusiasm does not mean retail investors have completely abandoned the A-share market. There are more smaller investors in China today who are tired of constantly checking stock prices and investing by themselves. They appear to have decided to entrust or outsource the task of wealth creation to trustworthy, professional asset managers.
I have seen such shift in investment approach among my relatives and friends. Many of them have become more serious and cautious about investing. They now prefer buying a mutual fund product rather than invest by themselves.
That is another positive sign: the Chinese stock market has become more mature with greater demand for professional investment and wealth management services. This could mean institutional investors will likely become dominant, which would translate into more maturity and less volatility in the market.
However, a market is a market. Stock prices will move as per the collective behavior and decisions of all investors. Some analysts warn speculators and whim chasers could return to the ring eventually, if/when they sense a bull run is forming.
That’s when rational investors should sit up and take notice that the current sober party might turn unruly.