Markets Jan 27

Surge in Chinese millennials and GenZ playing the stock market

The number of A-share investors exceeds 175 million and they are getting younger; Nearly a third of accounts are now owned by people aged from 24 to 30

Surge in Chinese millennials and GenZ playing the stock market
Nearly a third of investors in the China's A-share market are young investors who 'dare' to give it a go. File photo: AFP.

(ATF) After 30 years of development, China's capital market has seen many changes over the years. The size of the securities market has continued to expand, the pace of investors entering the market is also accelerating, and a new generation of young investors has got active in the market. What are their investment ideas? Compilation of reports on CCTV and other media give some clues.

Generation Z: Buying themes, chasing hot stocks, learning

This is the new generation of youngsters born between 1997 and 2012/15. GenZ, as they're known, have been a force in the markets for about two years, investing amounts such as 10,000 yuan (about US$1,550) in the market.

Xu Kaidi, the (young) president of the Stock Research Institute at Shanghai University of Finance and Economics, says Shanghai is a bit different from other cities. "The atmosphere for stock trading is very strong. Usually you can hear aunts and uncles discussing stocks in the gym, and the atmosphere of investment makes it easy for GenZ to get incorporated into an investment circle."

GenZ treat investments with seriousness as the support and trust of his family lie on investments. But when hot topics such as new energy, semiconductors, military industries, and liquor are discussed, family dinners can become uncomfortable.

Xu Kaidi told CCTV: "'Hot' stocks can be good for short-term investments at the beginning, but later if people suffer losses, I found that this investment philosophy or method was not suitable, I would start to do mid-term or some long-term investments."

GenZ are attracted to changing industries and companies that are transforming are studied closely. Schools have stock research clubs.

Xu Kaidi: “To be honest, one of my classmates looked at the research almanac yesterday and thought he should trade – OK, and then bought a lot. In fact, this situation is still relatively rare, because we are mainly in schools, but it is the science of stock investment we are studying.”

The investment experience of the past two years has given Xu Kaidi a lot of inspiration. He thinks the starting point for buying stocks should be via a research company; persevering in immediate gains with not going long-term. Forming a systematic investment idea is compulsory for every new investor. For this, he also recharges himself by enrolling in classes and reading extracurricular books.

“I took a class on quantitative investment, which lasted about two or three weeks. I think it is mainly driven by interest, because there may not be too many things related to market investment in the school. But I will read more books outside of class. There are many such materials."

Millennial investors: 'Metaphysics is not reliable'; value is the main thread

Millennials who are new investors have a process of gradually forming an investment system; the more mature "post-90s" investors are a bit more conservative, as most now have children of their own.

Yu Haian, an investor born in the 90s, said he and his wife have had a baby in the past two years. He specially prepared a parenting fund for investment, hoping to earn a relatively stable return.

"We have a lovely daughter, and some of her New Year's income, like red envelopes (money is a traditional gift in China), can be used as a basic investment fund. At the beginning, you might buy a stock for example, and then stare at it. Why is it going down, so I get nervous."

Over the years, with the experiences of friends around him, he and his wife told CCTV they had learned more about the stock market. The logic of choosing names and guessing numbers has repeatedly proved to be groundless. They realized that they wanted to stable returns, so they needed to find a reliable investment logic.

Yu Haian, a TV host, said metaphysics – philosophy considering the fundamental nature of reality – has become a trend among young people. But, the stock market is a game of mean reversion. In other words, share prices will sooner or later, revert back to the mean or average. The luck you get today will be lost.

"But in the long run, if you are really optimistic about a company, you should not change course frequently. This is actually very important. Long-term holdings will be more stable. Don't keep staring at it and be nervous about its rise and fall at a certain moment," Yu said.

Many millennials and older investors consult monks and numerologists, and treat the stock market more like a casino.

Younger investors prefer new products, but don't always win

Nowadays, "post-90s" and "post-2000" investors are more and more apparent in the A-share market. Although they are not as experienced as old stock investors, ‘they dare to fight.’ So, what are the other characteristics of their investment style? For these young investors, what advice do industry insiders have?

The 'Report on the Behaviour of Chinese Stockholders' shows that the number of A-share 'natural' investors has exceeded 175 million, and the "post-90s" and "post-2000s" have become the main force in opening accounts. Nearly 30% of accounts are owned by people aged from 24 to 30, so the people opening accounts are getting younger.

Wang Dan, director of Wealth Management Business Operations at China International Finance Corp, said: "Since last year, we have observed that the proportion of 'post-90s' and 'post-2000s' account openings is now close to 50% [of investors]. If you count the 'post-80s', this number should be 70%. So it is a trend that the age structure of customers is getting younger and for us it is also our main customer group."

Compared with older investors who have gone through many rounds of bull-bear swings, the new investors don't have much historical experience and ideological 'baggage'. They are often more novel and bold in terms of the variety of stocks they select and the style in which they build a position, Wang said.

Yang Zhongning, an Investment Consultant at Industrial Securities, said: "I think if you use one word to describe it, the most sought after are 'post-90s' investors – the newness. Perhaps as a young man, he has a higher acceptance and understanding of these new models and new products, listed to companies that can provide these elements. [So], I prefer the 'post-90s' investors."

However, due to their lack of experience, new investors can often be 'blind and impulsive.’ Before a person can develop an investment strategy or logic, their rate of wins is not high. Industry insiders suggest that young investors should try and experience more, or seek expert training and help.

Yang Zhongning said: “These 'post-90s' investors are still young, and there are costs and time for trial and error. For these investors, on the premise of keeping the bottom line of risk, do their best to try different styles. Invest, to understand your own investment style."

Wang Dan said: “Our first part is to provide [investors with] knowledge training and fraud prevention, and in the second part we increase our efforts to train them on various levels of wealth management products.”

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