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Stock Investors: Not Utterly Gloomy

May 10-2020   



Unsurprisingly, Chinese stock investors took a beating in their sentiment in the first quarter this year; Surprisingly, if put in the period from July 2008 to March 2020, the bleak mood caused by the pandemic was still more cheery than the gloom registered in July 2015 and January 2016, noted Prof. Shen Yan of the NSD in a recent online forum.

 

Prof. Shen heads a joint project by the NSD and a data consultancy to map China Investor Sentiment Index to gauge retail investors’ mood. The CISI is needed for two reasons, she said: One, retail investors account for 86% of all trade volume and therefore their mood fluctuation constitutes an effective reference for the ups and downs of the stock market; Two, the frequent emergence of Black Swan and Grey Rhino events begs for such kind of index. The more serious a crisis is, the more potent investor sentiment can be in explaining the market.

 

That Chinese investors haven’t lost their total calm in the pandemic might point to their heightened tenacity after years of ordeals. The SICI reached 44.5 in January – the peak in a 12-month span – and skidded to 42.6 and 40.8 in February and March respectively. The drop was particularly painful from January 20 to 23, the three days following the confirmation that the virus “can surely spread from people to people”.

 

Not all stocks fared the same in the first quarter. Food and beverage, leisure services, and construction materials were the jolliest, while textile and garments, national defense, and steel and iron were on the opposite end. The Growth Enterprise Market led all markets in mood and CSI500 sat at the bottom.

 

Investors also paid attention to the pandemic-fighting capability in the regions where listed companies are headquartered. Once the pandemic went under control, their attention was shifted to overall societal mood and resumption of work and production. Small companies, growth-type enterprises, and firms headquartered in regions with weak digital infrastructure were most susceptible to investor mood swings. Prof. Shen advised the authorities to anchor the overall investor mood and stabilize the financial market, while also tailoring policies for different groups based on their sensitivity.

 

Stock Investors: Not Utterly Gloomy

May 10-2020   



Unsurprisingly, Chinese stock investors took a beating in their sentiment in the first quarter this year; Surprisingly, if put in the period from July 2008 to March 2020, the bleak mood caused by the pandemic was still more cheery than the gloom registered in July 2015 and January 2016, noted Prof. Shen Yan of the NSD in a recent online forum.

 

Prof. Shen heads a joint project by the NSD and a data consultancy to map China Investor Sentiment Index to gauge retail investors’ mood. The CISI is needed for two reasons, she said: One, retail investors account for 86% of all trade volume and therefore their mood fluctuation constitutes an effective reference for the ups and downs of the stock market; Two, the frequent emergence of Black Swan and Grey Rhino events begs for such kind of index. The more serious a crisis is, the more potent investor sentiment can be in explaining the market.

 

That Chinese investors haven’t lost their total calm in the pandemic might point to their heightened tenacity after years of ordeals. The SICI reached 44.5 in January – the peak in a 12-month span – and skidded to 42.6 and 40.8 in February and March respectively. The drop was particularly painful from January 20 to 23, the three days following the confirmation that the virus “can surely spread from people to people”.

 

Not all stocks fared the same in the first quarter. Food and beverage, leisure services, and construction materials were the jolliest, while textile and garments, national defense, and steel and iron were on the opposite end. The Growth Enterprise Market led all markets in mood and CSI500 sat at the bottom.

 

Investors also paid attention to the pandemic-fighting capability in the regions where listed companies are headquartered. Once the pandemic went under control, their attention was shifted to overall societal mood and resumption of work and production. Small companies, growth-type enterprises, and firms headquartered in regions with weak digital infrastructure were most susceptible to investor mood swings. Prof. Shen advised the authorities to anchor the overall investor mood and stabilize the financial market, while also tailoring policies for different groups based on their sensitivity.