Chinese investors on average hold a stock for just 62 days compared to an Asia ex-Japan figure of 124 days. Remove China from the calculations and the average shoots up to 249 days, although, as the analysts at Citigroup who put together this research point out, length of ownership is falling across the region.
The China figure speaks volumes for the volatility of the market, which, in turn, goes a long way towards explaining the turbulence of the last few days.
By comparison, during the last big Chinese bull market in 1997, the average stock holding period was 56 days. The bull before that – 1994 – saw length of ownership hit 51 days.
Don’t forget the subsequent market slumps and vanishing liquidity, though. In 1995, the investors that hadn’t already cut and run were left holding stocks for an average of 486 days. In 1998, it was 249 days. Then the truly dark times towards the end of 2002 and the beginning of 2003 saw ownership periods in the 488-548 day bracket – people just didn’t want stocks (which, let us not forget, were headed towards an eight-year low).
Obviously it is the brokers who have gained from the shorter ownership periods: the more investors buy and sell, the more money brokers receive in commissions. No wonder the financial results for last year published by China’s brokerages look so rosy when set against the challenges of 2005 (official figures for the sector were never revealed, supposedly because they were so shockingly bad).
Now they just need a way to make money when the market is down and the investors shy away. Bring on financial futures.