High volatility in China’s stock market? Howard Davies: Because of the existence of many individual investors

During Shanghai Finance Forum 2018 jointly hosted by SAIF, CAFR and GFLF on December 15th, Howard Davies, Chairman of the Royal Bank of Scotland and Chairman of the International Advisory Council of the China Banking Regulatory Commission, announced that US stock market and its capitalization are now at a historical high, far above the total market capitalization of all stocks in China and emerging markets. To a certain extent, the US stock market is overvalued.

Meanwhile, Howard Davies also pointed that that the performance of China’s stock market is average, with extensive fluctuations. “The volatility of China’s stock market is extremely high, showing many days where daily volatility exceeds 1%-2%. To a certain extent, it is related to the existence of many individual investors, who don’t have effective vehicles of hedging.”

Then, what actions China shall take? He believes that in fact, the International Organization Of Securities Commissions (IOSCO) has provided some practical advices to China. First of all, it is important to address data gaps and information sharing issues and apply new insights into investor protection and education. And second, it is also essential to examine the role of regulation in FinTech.