How China’s Stock Market Differs to the US – 3 Key Pointers

Enodo Economics Chief Economist, Diana Choyleva with her thought of the day.

With Chinese equities correcting sharply after a formidable post-Covid surge, I thought I’d discuss today three important ways in which trading on the A-share market differs from the US market.

First, in China there is no day trading. If you buy a stock on Monday, you can’t sell it until Tuesday. All positions must be held overnight. In this context China’s recent trading numbers are impressive.

Second, all markets are fully funded. If you want to buy 100 RMB worth of shares you need to have a 100 RMB in your account, before you can do so. The positive flipside of that, is that settlement is almost guaranteed.

Third, there is a limit up and limit down – both are 10% but for ChiNext and the STAR board they are 20%. So, you can’t have crazy intraday moves of 50/100%, for example. All of this actually means that in China, you couldn’t have had the recent saga that was GameStop and Reddit in the US. And for foreign investors the efficient trading and settlement in China, is good news. Now whether Chinese stocks are a good investment is another question!

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