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In the United States, "smart money" is a term describing experienced, well-informed investors who understand how to use market movements to their advantage.
China's smart investors did very, very well in the year leading up to China's stock market crash. In the 12 months prior to mid-June, the Shanghai Index rose 150%. China's smart money got in early for the most part and enjoyed the ride.
But when China's stock market began to falter, the smart money took the hint and started for the exits.
According to Bloomberg, the number of traders with holdings worth 10 million yuan ($1.56 million) or more declined by 28% in July, according to China Securities Depository and Clearing Corp. data. The number of traders with holdings worth between 1 million and 10 million yuan fell by 22%.
Meanwhile, the number of accounts with holdings of less than 100,000 yuan (about $15,613) rose by 8%.
Of course, some of that was the result of the decline of China's stock market. But China's smart money clearly saw a chance to do a little profit-taking ahead of a broad market sell-off.
The Smart Money Saw China's Stock Market Crash Coming
"Wealthy investors, who have been through bear markets, are better at exiting," Hu Xingdou, an economics professor at the Beijing Institute of Technology, told Bloomberg.
And the heavy government intervention in China's stock market presented the smart money an easy way to exit their positions and preserve most of their gains. The Chinese government and entities acting on its behalf conveniently bought up the shares the smart money wanted to sell.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.