China’s stock market continues to make headlines as the hottest market in the world for 2015. Recently, the Shenzhen Composite has rocketed 47%, while the benchmark Shanghai Composite rose 19%. The diversity of the Shenzhen index, composed of young tech, media and telecom options, has contributed to this boom. On the other hand, the focus of the Shanghai market falls on large, state-owned firms. The overall Chinese economy, conversely, has been showing disappointing results and signs of slowing GDP growth. Although economic growth is slowing, investors are increasingly betting that the Chinese government, in an effort to remedy the economy, will enact stimulus action. Many experts estimate that this will prolong the stock market rise.
Other central government policies have also contributed to the Chinese stock increases. Banks can decrease the amount of cash in reserve, while benchmark interest rates were recently cut for the second time in 2015. Economists expect further interest rate cuts, which will prolong the booming stock market.
With the stock market on the rise, many Chinese investors are parting with swinging property sector investments, among many other alternatives, to put their money in the stock market. According to BNP, “around 170,000 new stock trading accounts are opened per business day in China, more than 10 times the average for last year.”
The Chinese market boom shows future promise, but international investors struggle to get a piece of the cake. Chinese stocks are very restricted, despite Shanghai’s program from last year that allowed foreign investment. For the meantime, Chinese investors will remain the benefactors of the boom.