Critics use this difference to claim that China markets are immature and somehow not quite right. I’m not sure that a market dominated by institutional, fund and ETF trading fully represents the price-discovery objectives which are supposed to underpin free market activity. However, markets dominated by these groups do behave differently and call for different trading and investment approaches.
China’s stock markets in Shanghai, Shenzhen and Beijing have some unique characteristics and this makes them more challenging to trade.As direct trading becomes more readily available to foreigners, it is important to understand these differences.
China’s small investors have a huge influence on stock prices. Unlike in the US, where large institutions dominate trading, China’s stock market is driven by its 219 million individual investors. They accounted for around 60% of trading volumes in the country last year, according to official estimates. This is often unfavourably compared with trading activity in the US where less than one-fifth of volume is attributed to small investors.
