The China Stock Market Has The Highest Turnover Ratio In The World

The stock turnover ratio is the highest in China. This is true especially with A-Shares which are for domestic investors and traded in the local currency. The B-Shares are bought by foreign investors and they cannot buy A-Shares. Unlike other markets such as the US where most investors tend to hold for the long-term, Chinese investors tend to be highly short-term oriented. From an article at Allianz Global Investors:

High turnover adds to A-share liquidity

Domestic retail investors in China dominate the market for A-shares and account for more than 80 per cent of daily turnover. With the investment culture in China focused more on momentum and short-term trading, the stock turnover ratio of China A-shares is among the highest in the world. High levels of turnover generally make it easier for investors to buy and sell shares.

China A-Shares Have a High Turnover Ratio

 

Source: Ten key facts about China A-shares, Allianz Global Investors

China also ranks the highest in terms of stock turnover ratio when compared to other countries as shown in the chart below:

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Source: The Global Economy

The key takeaway is that because most investors are retail investors and not institutional investors in China’s A-Shares, the market is prone to wild swings. For example, in a down market retail investors tend to panic at a faster rate and also engage in extreme speculation in a rising market.

The World’s Busiest Air Routes

The Singapore-Kuala Lumpur route is the world’s busiest air route in the year thru Feb, 2018 according to a recent study. Airlines made 30,537  trips average about 84 trips per day. The flight time between the cities is about an hour.

The World’s Busiest Air Routes are shown in the chart below:

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Source: Kuala Lumpur-Singapore named busiest international air route, The BBC

Australia’s Top Exports of Goods and Services 2016-17: Chart

The top Australia exports are Iron ore, coal and natural gas in terms of goods. In the services space, the top sectors are education and tourism. Australia is one of the top destinations for Chinese tourists. In 2017, 1.3 million Chinese visited Australia spending about A$10.0 billion. Tourism dollars also give a boost to other sectors of the economy both directly and indirectly.

The chart below shows the top Australian goods and services exports for 2016-17:

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Source: Australia: Caught in the Middle of US-China Trade Tensions?,  Franklin Templeton Investments.

Stock Market Performance Under Democratic Socialism vs. Military Dictatorship: The Chilean Experience

The stock market in Chile collapsed when socialist president Allende was elected back in the 1970s but soared when he was overthrown and military dictator Pinochet seized power.

Economic growth can be achieved either by the ballot or by the bullet. Or to put it another way democratic means of political system can drive economic growth. However in some countries democracy fails to deliver economic growth due to a variety of factors. In these countries, economic growth has been achieved when democracy was replaced by military rule. Though this is a controversial theory, it proved true in the South American country of Chile.

Salvador Allende was democratically elected as the President of Chile in 1970. However his socialist policies and anti-business sentiment did not go well with the business elite and overseas investors. As a result, the his government was overthrown in a bloody coup engineered by the US and military dictator Augusto Pinochet took power in 1973. According to a research paper by Daniele Girardi and Samuel Bowlesy, the Chilean stock market plunged by 22% in the first trading after Allende’s victory and stock prices continued to fall in the following days stabilizing after a decline of about 50% of the pre-election values.

When brutal dictator Pinochet took power in 1973, the trend reversed completely. In the first trading day after the coup, stock prices soared by nearly 80%. Stocks continue to move higher in the years that followed.

The chart below shows the performance of the benchmark Chilean index under Allende vs. Pinochet and earlier administrations:

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Source: Institution shocks and economic outcomes: Allende’selection, Pinochet’s coup and the Santiago stock market by Daniele Girardi (University of Massachusetts (Amherst)) and Samuel Bowlesy (Santa Fe Institute).

It should be noted that Chile’s economic and equity market growth during those turbulent years came at a heavy cost in terms of human lives. Thousands of people were killed or disappeared by Pinochet in order to maintain power and implement his radical policies. Though the concept of growth at all costs worked in Chile it may not work in all countries. So the idea that if democracy does not bring prosperity simply replace it with military dictatorship is utterly wrong to say the least.

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Why Own Foreign Stocks: Infographic

Investing in foreign stocks has many advantages. Despite living in a globalized world, many Americans have low exposure to foreign stocks. Going overseas can not only help diversify one’s portfolio but also offers the potential to boost returns. The following small infographic lists a few reasons to invest in foreign stocks:

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Source:In a World of Opportunity, Why Limit Your Choice?, Oppenheimer Funds