On Friday the China Securities Regulatory Commission (CSRC) took action to limit margin trading on the Shanghai Stock Exchange. A major reason why is visible in the chart below:
As a result of the recent rapid increase in share prices, many new (and unsophisticated) investors are being attracted in – new investor accounts rose to nearly 2 million in December from only a couple of hundred thousand a month earlier in the year. There are almost 100 million individual investor accounts on the Shanghai Exchange now.
In the past, when the market index has risen fast and then adjusted, investors have demonstrated noisily to show their displeasure and to blame the government for allowing it to happen.
What we see now are preemptive actions to try to prevent a reoccurrence in 2015.
Image credit: Ken Teegardin / Flickr