Morning Report Monday 25 May 2015
Significant Volatility may be just over the horizon
The Chinese Composite Index has soared 129% since July 2014 with some extremely worrying statistics emerging where the phrase bubble is being used regularly. Already around 90%, over double Australia, of trading on the Chinese market is made up of retail investors as their local stock market starts to feel like a Macau casino:
• Recently Margin Loans for retail investors in China hit a staggering 1.9 trillion yuan ~$A3.9bn.• In just one week alone in April over 4 million new stock trading accounts were opened.
A clear concern for an economy already slowing down and experiencing falling property prices is the pain the average man on the street would experience if we witnessed a decent share market correction. Personally, I believe the compounded risk is too large for the powerful Chinese government and they are likely to maintain their stimulus as they juggle a very tricky pack of cards.
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