Young Chinese people have jumped into stock trading in the past two weeks, after the Chinese government took its most aggressive measures yet to revive economic growth and encourage consumers to spend.
One popular online stock trading app has seen a surge in new accounts from people under 30. An account manager at a securities firm in northeastern China was inundated with questions from first-time investors. University students spent their Golden Week holidays reading investment advice last week.
These new investors are looking to cash in on a piece of the biggest market rally in nearly two decades. But they are taking a big risk. Benefits have been driven by policy changes and are likely to depend on further government action to support the economy.
And the market will be hair-triggered. Chinese stocks fell on Wednesday after rising 6% the previous day (10th straight day of gains).
For Chinese people born after the turn of the century, the investment frenzy is a dramatic departure. For most of their adult lives, a dire economy remained the status quo. But now fear of being exposed to China’s stagnant stock market has been replaced by fear of missing out, despite the risks of investing in a volatile market.
“A huge number of customers have opened accounts in the past few days, and most of them are new entrants,” said Tan Zimin, account manager at Northeast Securities, a Changchun-based brokerage firm.
Mr Tan said he received so many inquiries from people new to the stock market, up to 30 on some days, that he created a canned list of advice for beginners. He told them to start small with low-risk bets like exchange-traded funds and not use the money they need to pay rent or buy food.
China’s economy is struggling to recover from devastating lockdowns during the coronavirus pandemic. Since then, there has been little room for optimism. The unemployment rate for 16- to 24-year-olds was so high that the government stopped announcing it. Until recently, Chinese stock performance was among the worst in the world.
However, at the end of September, the Chinese government announced a series of measures, and the country’s stock prices soared, posting their biggest weekly increase in about 16 years. Trading volumes on September 26 were so high that the Shanghai Stock Exchange experienced delays in processing transactions. Mainland Chinese stocks initially rose more than 10% on Tuesday as markets reopened after a week-long holiday, but lost momentum and ended the day up nearly 6%.
Chen, a computer science student from southern Guangdong province who asked to be identified only by his last name, said he had never paid attention to the stock market before. However, the topic of late September could not be ignored.
While his classmates returned to their hometowns for vacation last week, 20-year-old Chen spent his vacation studying the basics of investing.
On Xiaohongshu, a social media app similar to Instagram, Chen described himself as a “beginner who dreams of jumping into stock trading and making money on his first try.” He planned to use the several hundred dollars from his scholarship to invest once prices settled down.
“For people like us who only have a few thousand yuan, we don’t have much to lose,” Chen said. “I’m not going to wait until I fully learn everything before I start investing.”
Many young people are turning to online stock trading platforms such as Futu and Snowball that allow them to start trading within a day or two. Tiger Brokers, which allows investors to access Chinese stocks listed in Hong Kong, saw a 77% increase in the number of users under the age of 31 compared to the previous week in the days following the government’s announcement, the company said.
Vera Chen, a second-year business student from Guangdong province, said she was worried that some new investors were not making informed decisions.
Ms Chen, who posted on social media about investing in mutual funds, said she warned her followers not to get caught up in emotions when investing. But some said they would buy anything she bought.
“Honestly, I think this phenomenon is a little strange,” Chen said. “Many people just think, ‘There’s a bull market and I have to make money,’ without fully appreciating the risks.”
As confidence in traditional investments such as real estate continues to waver, young people in China feel they have fewer investment options. Some people bought small golden beans.
“A lot of people are waiting to put money into the market,” said Beisaan Lin, an equity advisor at Singapore-based private bank Union Bancare Prive. “Finally, they were given the opportunity to do so.”
