China: Stock Dormancy

For the past few weeks, most of the major news in China has centred on the Communist Party Congress.  This is an pretty important event in China that happens once every 5 years and usually results in a number of far-reaching policy and people changes throughout the country and government. 

What has slipped under the radar during all the coverage of the Congress, was the government’s move late last week to shutter 20.23 million dormant China A-share accounts.  These accounts had less than US$15, no actual securities, and/or no transactions in the previous 3 years.  At this point in the blog, I would like to insert something that says, these accounts represent XX% of the total, but the problem is, there’s no data on that, which is one of the issues currently in the financial system here in China.

We’re hitting the same problem in a piece of research that we’re working on looking into to get a statistically relevant view of Shanghai stock market investor behaviour; there’s a lack of information and what’s out there isn’t very consistent.  This isn’t just a problem with local publications/resources either as the FT and WSJ seldom come up with the same numbers.  As an example, when we first tried to zero in on the number of individual retail investors, we had to wade through the fact that each investor can open multiple accounts and then the fact that institutions often have employees open accounts to allow the institution to do additional trading through the employee’s account.  We initially hit similar issues on investor demographics and amount invested.

We have however though a lot of primary and secondary research come up with some very accurate numbers and over the next few weeks as we start getting results in from the research that we’re doing, I’ll be sharing it here.  There hasn’t been a statistically relevant piece of research looking at what the average Chinese investor is thinking, so it should be quite an interesting piece. 

In the meantime, take a look at the following link for coverage of the Congress:  http://www.chinadaily.com.cn/china/china_17thcongress_page.html.  Granted it’s ‘controlled’ coverage, but this year the press, as they will be for the Olympics next year, have been allowed a new level of access to the Congress, so there’s more information available than any previous.  Still, pick up next weeks’ copy of the Economist for a more insight.