Success of stocks hinges on property

Many believe the real estate and stock markets have a seesaw relationship - when one is up, the other is down. In actuality, however, no such relationship exists.

Recent gains aside, the stock market cannot really take off until the ongoing problems in China's real estate market are solved.

An immense amount of money has surged into real estate over the past few years as investors have sought to capitalize on soaring prices. The situation has left less money available for the rest of the economy, including the stock market. It also led many listed domestic companies to shift their primary business to real estate. These companies will eventually get out of real estate when it is no longer highly profitable.

The economy's dependence on real estate poses risks for its development. For instance, a sluggish property market could hurt many banks. And banks, property developers, steel companies and building material producers account for the majority of domestically listed companies. If these companies struggle, it won't be good for the stock market.

If changes aren't made to the real estate market, money won't flow into stocks.