Pullback in New Accounts, But Still Growing

New account openings have pulled back from their unsustainable peak.

It’s Amateur Hour in the Booming Chinese Stock Market

As Chinese individual investors pour back into the world’s hottest stock market, they’re leaving their fingerprints all over the place. The most telltale sign: The Chinese equivalent of penny stocks, assets that have long held an allure for amateurs, are trouncing the benchmark index.

Shares in China’s CSI 300 Index that were quoted below 5 yuan (81 cents) at the end of September have since jumped an average 63 percent. That compares with a 35 percent gain for all index stocks and 11 percent for those priced above 50 yuan.

That outsized rally reflects the growing market impact of inexperienced investors in a country where new stock accounts are opening at the fastest pace since 2007 and individuals comprise about 80 percent of equity trading. While professional investors measure a stock’s worth relative to the company’s assets or earnings prospects, it’s the price appearing on computer screens that matters most to people like 35-year-old housewife He Mei. As she sees it, the math is simple -- low price equals low risk and lots of value.

China is a great market for value investors because most people are trading based on technical analysis at most.