China has had the world seeing red.
First it was up, and now it’s down, and the Chinese stock market has the world riding a roller coaster of volatility, reports Business Insider. But some of the accompanying fear has been too hyped up, especially for a market that is tiny compared to the U.S. stock market.
“The stock market wealth affect in China is smaller than most assume, as stocks represent less than 15% of household financial assets and equity issuance accounts for less than 5% of total social financing,” writes HSBC Chief Economist for Great China, Qu Hongbin in July 7 note to clients.
The Chinese put most of their money in cash and deposits. In May, stocks made up about 13% of household assets, up from 10% in 2014. Chinese investments are growing, but will likely remain low compared to other markets, says Qu. “The recent rally was driven by an increase in leverage rather than a significant broadening of the investor base.”
Photo: Christopher via Flickr.