Bloomberg It looks like the price chart of an over-the-counter penny stock: dizzying gains, abrupt U-turns, harrowing declines. by Belinda Cao and Kana Nishizawa
'But this is no obscure security from the rough-and-tumble fringes of
Wall Street. It’s China’s Shanghai Composite Index, the yardstick for an
$8.1 trillion equity market -- the world’s largest after the U.S. --
where extreme volatility is becoming the norm.
'Fueled by record amounts of borrowed money and the whims of more than
80 million individual investors, swings in the Shanghai Composite have
climbed to the highest levels since 2008. They’re bigger than every
other benchmark index worldwide after Greece, along with a quarter of
the 100 most-traded penny stocks on U.S. bourses, according to data
compiled by Bloomberg.
'“You’d think you wouldn’t see this volatility in such a large equity
benchmark,” Ankur Patel, the chief investment officer at R-Squared Macro
Management LLC, said by phone from Birmingham, Alabama. “The flows in
and out have been so substantial and it’s been driven by retail
investors. Those are the same characteristics you see in penny stocks.”'