Shenzhen Stock Exchange (SZSE) recently released the 2013 Retail Investor Survey Report, which provides first-hand information for the improvement of investor education and service.
It has been the fifth annual survey conducted by SZSE since 2009, covering investors’ educational levels, trading practices and decision-making manners, brokerage houses’ risk education and investor service, and investors’ reaction to trading risk alerts and Internet finance. The survey included both follow-ups on previous surveys and new emerging issues.
To ensure the survey is scientific and precise, SZSE has entrusted Nielsen Company (China), a renowned survey agency, with distribution and collection of questionnaires. The current survey, starting in December 2013 and ending in January 2014, targeted individuals aged between 25 and 55 who had traded stocks in the last 12 months. It selected one to two representative cities in each of the nation’s six major areas based on regional distribution of securities accounts and the age structure of investors, i.e.: Beijing (North China), Dalian (Northeast China), Shanghai and Hangzhou (East China), Wuhan (Central China), Chengdu (West China), and Guangzhou and Shenzhen (South China).
According to the characteristics of investors with different ages, the survey was conducted online for those aged above 50 and those below 50. Finally, 3,076 valid samples were collected, with standard error less than 3% (confidence level 95%), including over 350 samples of cross-board investors, with standard error less than 6% (confidence level 95%) and over 100 samples of ChiNext investors, with standard error less than 10% (confidence level 95%). (Note: investors were grouped into three categories, namely, cross-board investors, ChiNext investors and non-ChiNext investors. ChiNext investors referred to those who had traded on the ChiNext market as well as other boards of SZSE in the past 12 months, while non-ChiNext investors referred to those who had not traded on the ChiNext board in the past 12 months even though they might had opened ChiNext accounts. Other terms such as “securities investors”, “retail investors” or “investors” as used in the report all referred to cross-board investors.)
The survey results are summarized as follows:
1. Educational levels of cross-board investors continued to rise, and ChiNext investors have received even higher education.
In 2013, educational levels of cross-board investors continued to rise. 74% investors surveyed had a bachelor's degree or above compared to 71% in 2012. ChiNext investors had even higher educational levels. 79% ChiNext investors had a bachelor's degree or above, which was six percentage points higher than the figure of 73% for non-ChiNext investors.
2. Investors regained confidence in equity investment with increased trading activity
In 2013, retail investors’ confidence in equity investment and their trading activity were on the increase. More specifically,
1. Retail investors’ capital investment in securities markets rose. The average balance of assets in the accounts of investors surveyed was RMB 494,000, a significant increase from RMB 381,000 in 2012. The average account balance for ChiNext investors maintained at last year’s figure of RMB 673,000, and the figure for non-ChiNext investors soared from RMB 284,000 in 2012 to RMB 435,000 in 2013, an increase of 53%.
2. Retail investors’ asset allocation to equity investment went up slightly. The investors surveyed invested 28.3% of their total investment value in equities in 2013, which was slightly higher than the figure of 26.6% for 2012.
3. Non-ChiNext investors’ trading activity was slightly up. The average trading frequency for investors surveyed was 5.3 trades per month in 2013, compared to 5.0 trades per month in 2012. Specifically, the average trading frequency for ChiNext investors was 5.1 trades per month, compared to 5.4 trades per month in 2012; Non-ChiNext investors traded more actively in 2013, with their average trading frequency rising from 4.8 trades per month in 2012 to 5.4 trades per month in 2013.
3. Investors’ asset portfolio was more diversified and funds’ penetration surged
Investors’ asset portfolio became more diversified in 2013. The respondents owned an average of 4.49 investment products per capita, which was higher than the figure of 4.21 and 3.84 in 2012 and 2011 respectively. Except for wealth management products offered by banks, precious metal and FX products, the penetration level of all types of investment products grew to different extents. Public funds were investors’ most favored product with cash inflows up 10% from that in 2012.
4. ChiNext investors’ expected return and risk tolerance were higher than that of non-ChiNext investors
According to the survey, ChiNext investors’ expected annualized average rate of return was 25.9% in 2013, which was close to the figure of 26.2% in 2012. Their tolerable rate of losses was 23.6%, compared to 24.6% in 2012. Non-ChiNext Investors’ expected return on equity investment rose from 19.1% in 2012 to 21.8% in 2013. Their tolerable rate of losses was 20.3%, which was largely remained unchanged from that in 2012. Overall, both ChiNext investors’ expected return and risk tolerance were higher than that of non- ChiNext investors.
5. Investors used more sources to obtain investment information and paid more attention to listed companies’ fundamentals
In general, the investors surveyed used more investment information sources than the previous year, with an average of 3.3 sources in 2013 compared to 3 sources in 2012. Similar to previous year, the top three sources in 2013 were “analysis of technical indicators such as price movement and turnover changes”(59%), “Internet media (such as stock chat-bar, forum and weibo)”(47%) and “information disclosure such as prospectuses, periodic reports and ad hoc announcements”(40%). It is of note that the percentages of “field investigation of listed companies” and “participation in investor seminars” increased considerably from that in 2012, by 7 and 4 percentage points respectively, indicating that investors paid more and more attention to analysis of listed companies’ fundamentals.
With respect to various boards, ChiNext investors used more investment information sources, averaged at 3.7, than non-ChiNext investors, averaged at 3.1. Non-ChiNext investors relied more on personal recommendation, while ChiNext investors focused more on their own judgment based on the information they collected from stock price movement, company announcements, brokers’ investment reports, etc.
6. The competition in securities brokerage business heated up further, commission price wars cooled down, and brokerage houses continued to enhance their service quality
The average commission rate of securities houses continued to fall in 2013, but with reduced declining range. Compared to the levels of 0.08% in 2012 and 0.11% in 2011, the average commission rate was 0.07% in 2013. This indicated that brokerage houses no longer solicited investors solely by price wars.
On the other hand, brokerage houses enhanced their competitiveness by improving their services to investors. 75% of brokerage houses took the initiative to contact their clients, higher than the figure of 73% in 2012. Their average frequency of contacting investors was 0.85 time per week, higher than 0.82 time per week in 2012. The top three contact purposes were “recommendation of stocks or investment products”, “update on macro environment policy changes” and “alert of trading risk”, accounting for 72%, 65% and 57% respectively. As for contact means, 79% of brokerage houses chose SMS, the next were telephone (66%) and E-mail (52%). 53% of the respondents had positive views on brokerage houses’ contacts with them and said that the contacts were “of great or considerable help to them,” higher than the figure of 49% in 2012.
7. Most retail investors were cautious on margin trading and securities lending as they generally held that margin trading and securities lending involves great trading risk
As a basic credit trading system in securities markets, margin trading and securities lending has increased trading activity since its introduction in 2010. The survey reveals that the respondents became more risk-averse when it came to margin trading and securities lending. Of all the respondents who had participated in margin trading and securities lending, over 81% held that margin trading and securities lending involves great trading risk and therefore they “should be more cautious” than trading stocks. The respondents who had not opened margin trading and securities lending accounts mainly attributed their unwillingness to “margin trading and securities lending involves a very high degree of risk” and “don’t know or haven't hear of margin trading and securities lending”, representing 45% and 30% of the respondents who had not participated in margin trading and securities lending.
8. SZSE investor relations platforms yielded initial results
In order to obtain the information about investors’ satisfaction to SZSE’s IR services, for the first time this year, the survey included a comprehensive inquiry about SZSE’s Easy IR and other IR service platforms. The inquiry reveals that the SZSE IR platforms gained initial success. Specifically:
1. More investors recognized and used SZSE’s web-based EasyIR service. 51% of the respondents said that they know the website, a sharp rise from 44% in 2012. Among the 51%, more than eighty percent (82%) had used the website.
2. More than forty percent (43%) of investors recognized SZSE’s Easy Investment Knowledge service, an online investor education and game website. Among these investors, more than eighty percent (82%) had visited the website and experienced the service.
3. More than forty percent (45%) of the respondents know the contact information of SZSE’s client service team. Among the respondents who had contacted the team, 42% were fully satisfied, 58% were relatively satisfied, and almost no one was dissatisfied with the service.
9. Investors were positive on “online voting at general shareholders’ meetings”, but some worried about the effectiveness of online voting
The respondents were enthusiastic about online voting. 61% of the respondents said that if online voting is fully introduced they would “selectively participate in online voting depending on the importance of proposals”, and 32% said that they would “actively participate in and try to vote online at every shareholders’ meeting”. As for online voting channels, more than fifty percent (55%) of respondents said that securities trading software is the most convenient online voting channel, and nearly thirty percent (27%) of respondents even expressed their wish to vote via their mobile-phones, with younger, highly educated respondents more preferring mobile phone voting. The three main reasons why some respondents had not participated in online voting included “don’t think that online voting will count” (accounting for 53%), “don’t know how to use online voting system” (accounting for 38%) and “don’t know the availability of online voting” (accounting for 38%).
10. More than ninety percent of investors heeded trading risk alerts as well as securities houses’ SMS and telephone alerts but expected improvement of the contents of alerts
94% of the respondents said they had paid attention to trading risk announcements issued by listed companies and 94% also said that the contents of such announcements need to be improved. When it comes to the SMS/telephone alerts issued by securities companies reminding investors of trading risk announcements, up to 98% of the respondents considered the alerts “necessary” and 44% even “hope that the SMS or telephone alerts contain summaries of the announcements”. Nearly ninety percent (89%) of the respondents recognized the value of trading risk announcements and factored them in when trading. Nearly seventy percent (69%) of the respondents said that they would “make a decision whether or not to reduce positions in relevant equities after taking into account various factors such as market conditions”, while twenty percent (20%) of the respondents said that they would “immediately reduce holdings in relevant equities according to the trading risk alerts”.
11. Internet-mediated finance such as online banking, the third-party payment platform and Internet-based wealth management saw further penetration and over half of investors worried about Internet information security
According to the survey, online banking, the third-party payment platform and Internet-based wealth management were the three Internet finance products that were most recognized and used by investors. 83%, 83% and 72% of the respondents “have heard of” the three products respectively. 75%, 74% and 56% of the respondents have “used or wanted to use” the products respectively. As for the various risks associated with Internet finance, more than fifty percent (51%) of investors said that their biggest worry is Internet information security risk. The next worry is finance investment risk (accounting for 18% of the respondents) and policy and regulatory risk (accounting for 14% of the respondents).