The retail investor
China’s stock markets are primarily made up of retail investors – that is non professional investors – wealthy individuals, as opposed to institutional investors. It is reported that the retail investor in China own in the region of 80% of ‘A’ class shares on the Shanghai stock market.
Retail trader
This could easily mean that retail ‘trading’ would have a dramatic effect on market movements if sentiment becomes an issue. Chinese investors are also playing catch up with the rest of the world due to the holiday period – so it is hardly surprising they have taken a knock as stock markets open again since shutting shop on 23rd January for the holidays.
The question now is how bad will the effect of the coronavirus be on China’s long term economy? We have seen the initial shock and we will likely see a small re-bound, but then what?
Damage to GDP growth?
Market analysts are suggesting that the impact of the virus could harm growth if it lasts for a prolonged period. Major cities in full or partial lockdown, and this will, in time, pose a serious knock on affect. Local businesses, cinemas, coffee shops factories have been forced to close. And this will impact China’s trade internally and worldwide.
Not business as usual
Starbucks, Toyota, McDonald’s and Volkswagen are just some of the businesses to have halted operations or closed outlets across China.
It will already have had an affect on businesses around the world with potentially far more restrictions and closures to come.
The fear is that the ‘fear’ of the coronavirus spreading will hold up China in both its production and buying capacities. Both purchasing and selling internally and externally will eventually grind economies to a halt.
Double whammy
The coronavirus is delivering a direct double whammy to the economy! And that’s without calculating the affect on health.
Shops and factories closed
It is preventing the consumer from buying goods directly from shopping because of movement restrictions, and it is preventing factories getting back to work to manufacture the products the world loves to buy.
Isn’t it inevitable that China, as part of the world’s economic, machine will suffer a decline? But then again, judging by global stocks recovery seen today, you wouldn’t necessarily think so…