Will anything stop the booming Chinese stock market?
Two days ago, the Chinese government tripled the tax it levies on stock trading in an effort to cool the demand for Chinese securities.
With more than 20 million stock trading accounts opened by its citizens in China so far this year, the total number of stock trading accounts in China has now surpassed 100 million.
The new regime in China is slowing moving from a communism controlled state, and the Chinese love the capitalism they are being permitted to participate in. The bottom line is that there is more demand for equities than equities themselves. This has been sending the Chinese stock market sharply higher this year.
The Chinese government has tried to slow the demand for its equities in the past. As recently as this past February, the government tried to curb investing in Chinese equities by increasing borrowing requirements for buying stocks. That move sent the key Chinese CSI 300 index down for only a few days before the speculation started up again.
I wrote earlier this week about how former Fed Chief Alan Greenspan is wrong in expecting a meltdown for the Chinese stock market. In this universe, there isn’t an investment trend stronger than one that keeps moving in a single direction. This latest move by the Chinese government will have only a temporary negative impact on Chinese stocks.
With 100 million stock brokerage accounts chasing very few Chinese listed public companies, this is a bull market no one can stop. I expect to see the Chinese stock market continue its strong uptrend.