Is the COVID-19 Spread a Buying Opportunity? Chinese Investors Jump into the Stock Market

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Chinese people are judging the financial market turmoil caused by the spread of COVID-19 as a 'buy-the-dip' opportunity in stocks and are rushing into the market.

According to the China Securities Journal on the 11th, searches on how to open stock accounts on China's internet search engine Baidu surged after February 3 this year. In particular, during the period from February 9 to 16, related search terms were most frequently searched in Wuhan, Hubei Province, where the novel coronavirus outbreak was concentrated.

Chinese people's interest in stock investment led to index rises and increased trading volume.

On the 5th, the CSI300 index rose 2.2% to 4206.72, marking the highest record in the past two years. Also, from February 19 to March 3, over 10 trading days, the total trading volume of China's two major stock markets, the Shanghai and Shenzhen Stock Exchanges, exceeded 1 trillion yuan (approximately 171 trillion won). On the 25th of last month, the trading volume increased to a record high of 1.4 trillion yuan.

The Chinese state-run media Global Times cited experts' diagnoses, reporting that despite the fear of COVID-19, Chinese people rushing into the stock market is the result of a combination of factors: the public's trust in the Chinese government that the virus can be controlled, expectations that the government will actively implement economic stimulus measures to revive the economy, and the judgment that the current valuation of the Chinese stock market is not overvalued.

Li Daxiao, chief economist at Shenzhen Yingda Securities, explained these backgrounds, saying, "People believe that China's COVID-19 situation is improving," and added, "Moreover, after the Lunar New Year holiday in January, Chinese people who were unable to go outside due to the spread of COVID-19 had more time to study and analyze the stock market."

The enthusiasm of Chinese people for stock investment amid the COVID-19 situation sharply contrasts with the recent global stock market turmoil caused by the spread of COVID-19.

The New York stock market suffered a direct hit on the 9th (local time), with the market capitalization of the three major indices evaporating by about $5 trillion (approximately 5,986 trillion won) due to the spread of COVID-19 and the plunge in oil prices. Japan's Nikkei 225 index also fell below the 20,000 mark, hitting its lowest level in 14 months.

Dong Dengxin, director of the Finance and Securities Research Institute at Wuhan University of Science and Technology, explained, "Despite the recent plunge in major countries' stock markets, China has not suffered significant damage partly because it has relatively independent monetary policy," adding, "The yuan is not yet an international currency, and China's 10-year and 30-year government bond yields remain at around 2-3%. The stock market is also undervalued." He added, "In the global stock market downturn caused by the spread of COVID-19, the Chinese market can serve as a safe haven. Currently, individual investors in China are flocking, but there is a possibility that more foreign investors will rush into the Chinese stock market."

This content was produced with the assistance of AI translation services.