There's a story that Joseph Kennedy sold his stocks on the cusp of the Great Crash of 1929 after a shoe shine boy shared trading tips with him.
If even the shoe polisher is buying stocks, he reasoned, the market must be riding for a fall.
New data from the China Household Finance Survey, a large survey of household income and assets headed by Professor Li Gan of Southwestern University of Finance and Economics, provides fresh insights into who has been driving the recent rally in China's markets.
It is not reassuring.
Gan's survey, which was conducted at the end of last year and covers about 4000 households across the country, finds that the biggest new investors in China's equity markets have less than a high school education and relatively low levels of asset ownership.
More than two thirds of new equity investors left the education system by middle school - which in China means around the age of 15. More than 30 per cent exited at age 12 or younger. Household wealth for new investors is about half the level of existing investors.
There was already strong evidence that the 78 per cent surge in China's equity markets in the past year was driven by momentum rather than fundamentals.
New trading accounts and trading volumes have soared. Expectations on growth and profits have not.
The new survey data adds to the impression of a rally fuelled by inexperienced retail investors.
That does not mean it cannot be sustained. China has a large population with a substantial volume of savings and limited alternative investment options.
It does mean though that the trajectory of China's markets will be unpredictable, and prone to sudden reversals as sentiment shifts.
The survey also highlights the growing appeal of shares relative to the slumping property sector. For survey participants with multiple homes, expectations on share prices are markedly higher than expectations on property. That adds to the evidence that the speculators who were a big driver of property demand are now steering clear.
In theory, a shift away from investment in property toward equities is a positive development. China's property sector is already oversupplied. As central bank governor Zhou Xiaochaun has said, rising equity markets make it easier for firms to raise funds. In practice, an unsustainable rally in which retail investors get burnt would do no one any favours.
The survey has better news on labour markets. The results show unemployment at 4 per cent in the fourth quarter, down from 5.6 per cent in the third. The pronounced drop is likely to reflect seasonal effects or surveying issues. Seeing through that, the headline assessment is that unemployment is low.
At the National People's Congress, Premier Li Keqiang promised more stimulus if the slowdown in growth started to dent employment. The latest evidence suggests that condition has not yet been met.
Bloomberg
