HT to Standard Chartered for the title of this post and the research.
The bank’s China team are looking at Google Trends as an indicator of the country’s consumer appetite.
It’s not scientific per se (only 23 per cent of China’s population is online and of those only about 27 per cent use Google as a search engine) but it is interesting. Here are some of the results.
First on the stock market.
Does the wisdom of the online crowds extend to the stock market? Given that the Internet is a huge source of market commentary and stock information for millions of retail stock pickers, we think so. We tracked searches for `stocks’ (‘??’) and plotted the results against the Shanghai Composite Index in Chart 7. The results are pretty cool, we think. The bull market which began in H2-2006 was preceded by a sharp uptick in searches. The peak in searches during the week of 25 May 2007 was a strong and early ‘sell’ signal. After that, interest collapsed. Some 20 weeks later (on 12 October), the SSE composite hit its peak, and then collapsed too. We guess all that search activity may have been indicating more and more people and money coming into the market, fuelling a speculative bubble. Once search activity peaked, only momentum was carrying the index higher. That momentum was able to sustain the rally for 20 weeks; when prices fell, there was little to support them. The lack of searches since May has shown a lack of support for equities… until recent weeks.
What has happened recently is interesting. The number of searches on stocks stabilised at the end of August 2008, which came ahead of stock prices finding a floor – two months later, in October-November 2008, the SSE stabilised. The number of searches then bounced back up in December. And lo and behold, we have experienced a mild (17%) rally off the low. Recent search activity suggests some stability at these levels.
And on gold, China’s googlers are decidedly not of the buggish-variety. The chart of the search for the yellow metal is below left.
Perhaps more interesting is the chart to the right — showing searches for “CNY appreciation’ and ‘CNY depreciation’.
Interest in ‘appreciation’ of the yuan peaked in July 2005 and has been at a low level since. Likewise ‘depreciation’ has been quite consistently at a relatively low level — except for a little uptick around December 2008 – January 2009. Here’s Standard Chartered’s take on the action:
Exporters on the east coast (and their employees) have apparently been the most preoccupied with CNY appreciation — search levels have been highest in Ningbo, Shanghai, Xiamen, Hangzhou, and Shenzhen. However, Beijing came first in searches for ‘CNY depreciation’. We are not sure why. Might it suggest that sometime in mid-December 2008, depreciation gained relevance as a policy idea? Unfortunately, we cannot narrow the search data to the government headquarters of Zhongnanhai.
Related links:
Chinese liquidity – and stocks – go BOOM – FT Alphaville