If this spring showed markets anything, it’s that records are made to be broken. In April and May, A-share and H-shares rallied to new seven-year highs.
Then they nose-dived, with the Shanghai Stock Exchange Composite Index plunging 28.2% from mid-June up to July 9. The three-week plummet has wiped out $2.36 trillion in market value, according to Bloomberg.
However, despite the current sell-off, China is still one of the best performing markets this year. The rally earlier this year came after the CSRC announced plans in March that mainland mutual funds would be allowed to participate in the recently launched Hong Kong-Shanghai Stock Connect programme.
This turnover explosion led to a record number of brokerage account openings. The number of new account openings reached 13.6 million in April, exceeding the previous record of 5.1 million in June 2007, BOCI notes. According to the CSRC, 90% of the market trading was contributed by retail investors.
The Chinese mutual fund industry has also experienced exponential growth. It set a new one month AUM record in May, accumulating $193 billion in assets that month, Z-Ben Advisors said citing Asset Management Association of China (AMAC) figures.
This has contributed to a surge in China ECM activity year-to-date, with volume reaching $116.5 billion via 490 deals so far this year, the highest volume and activity on record, Dealogic notes.