Not exactly. It's so important to be precise when trying to understand problems and topics. The failure of the obama movement can be directly traced back to them never ever ever beginning to understand the problems they said they were trying to solve.Endovelico wrote:Mr.P,
Strictly speaking, you are right. Just buying or selling shares does not have to have any impact on stock's value. But if one is referring to a willingness to buy certain stocks which is greater than the supply of said stocks, then the price will go up.
A market maker is paid on volume and spread, not price movement. As such, his only goal is to match as many buyers and sellers as he can.
He has order screens that show him all kinds of computer orders waiting to be filled. The methodology of doing this is complex to the beginner, but the concept is pretty easy. Eg, many orders are hedged by the market maker and stored as inventory. People think when they execute a transaction they are exchanging with another investor but this is often not the case. The market maker is often managing inventory.
Point being, if China decides to a buy a trillion dollars worth of stock over a week or what have you, they will take that business, but once that buying is over the price is then set by new people bidding on the stock. The previous expenditures on the stock have no bearing on new trades coming in after the fact. The securities can be bid in either direction, from zero to infinity with no regard to previous buying.
Further there is a fallacy of what we might call "moneyflow" indicators (pls google) which are a gigo model. If China buys a trillion in stock then idea is they "Added" a trillion to the market. This is a fallacy, because the people they bought from took a trillion "out of the market". It's a wash.
And point being, Naps et al is if the Chinese gov't understood this they absolutely would not be doing what they are doing.
Uh, what I think you are making is a confidence argument which is a different but related argument. Traders use sentiment indicators to try to measure this. Another popular one from the past is stock split announcements. But, my argument is over different time frames this is irrelevant. Eg, stock split companies often eventually stop splitting and perform so poorly they go private again (Dell Computer) or are perpetually lackluster (MSFT). So time frame is an issue.It would be also enough for the Chinese government to indicate to the market its willingness to buy shares at prices higher than the last price quoted for the value of those stocks to go up. I presume that for most people if the Chinese government was buying huge amounts of shares on the stock exchanges, such an increase in demand might be enough to push prices up. But you were right in your comments.