Gambling operators the world over are in search of the Chinese gambler. Their appetite to gamble meets no global equal. Whether you operate casinos in Africa, South Korea, Australia or Las Vegas your revenue will be boosted by engaging with the Chinese gambler.
Osborne recalled his days when he used to go to Macau to gamble on Baccarat. He noticed the Chinese approached ‘matters of luck, fortune and sudden wealth gained by not hard work or cunning but by the act of throwing yourself into the flow of i ching’. Baccarat the, favourite game of the Chinese in Macau, takes up ninety percent of the play. It is a “game of little skill or intelligence and win or lose”, it is not your fault but the fault of the cosmic winds.
One wonders whether the prospect of losing face has something to do with the choice of Baccarat. If it is not your fault, you cannot blame yourself or for that matter can anyone else. But if, after studying a horserace all night and you still did not back a winner, it is your judgement that is wrong.
Chinese players will also be seen to be changing tables where the trend of winning or losing is apparent, known as following the wind of good fortune.
They refer to playing the market as ‘chao gupiao – stir frying stocks.’ The stir fry being a quick and tasty meal. They do not see it as long term investing, just a means to grow rich quick and as effortlessly as possible.
Most inventors are private citizens with modest means who borrow money to make their purchases, investing on margin. So if the market dips they may have a margin call where they have to add money to stay within the broker’s parameters. This may cause an early sale of stock and if the market falls further there is a stampede to get out.
According to Goldman Sachs margin lending alone accounted for 12 percent of the market float and 3.5 percent of China’s GDP.
However the Chinese Government alarmed at seeing the stock market plunge 26% from 1 May 2015 to the bottom in July did the unthinkable and stopped sell trades!
Herein now lies the big question.
A point picked up by David Pilling in the FT who compared the Chinese stock market as having ‘more in common with the gambling casinos of Macau than with global exchanges in western capitals such as New York, London or Tokyo’.
This is a subject I would very much like to research. Is there any correlation between restricted gambling and the volatility of stock markets?