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| It seems that the stock market is losing confidence in China's economic recovery. (Source: SCMP) |
Hopes for a post-pandemic economic recovery in China are fading as retail investors in the country watch stock prices fall.
Chinese brokers had expected billions of yuan in savings to flow into the stock market this year as the economic recovery and uncertainty over the property market made stocks one of the only investment channels.
However, as foreign cash stopped pouring into China's stock market, households also turned away, causing the stock market to fall.
Hong Kong’s Hang Seng Index is trading at its lowest level of the year. The loss of momentum in the stock market is prompting investors to pull out their money. Interviews with dozens of retail investors show that frustration is widespread.
China's retail investors are also a major force in the market, accounting for about 60% of turnover, according to Yi Huiman, chairman of the China Securities Regulatory Commission.
The country’s equity margin trading balance is hovering around a one-month low, while A-share market turnover is also at its lowest since early March.
Brokerage account creations fell in April. Mutual fund launches, a sign of investor interest, also fell.
Hong Hao, chief economist of Grow Investment Group, said that it seems that the stock market is losing confidence in the recovery of the Chinese economy.
Investor enthusiasm has waned as economic indicators have weakened and the global backdrop has seen rising political tensions and slowing economic growth.
China’s industrial output and retail sales growth both fell short of forecasts in April, while lending has fallen sharply as Western efforts to reduce reliance on the country’s manufacturing have begun to bear fruit.
All of these issues have made domestic investors nervous. Wang Zaizheng, an investor, said it was difficult to grasp investment opportunities this year when the themes were changing so quickly and caution was needed against policy and geopolitical risks.
Not all signs are negative, however, with some observers seeing the return of local investors as a major boost.
Mr. Chi Lo, investment strategist at BNP Paribas Asset Management based in Hong Kong, predicts that about 800 billion yuan will be invested in the market.
Local investors will drive stronger market growth and the recent expansion of non-bank lending is an early positive sign that money is starting to flow into the economy, said Hayden Briscoe, head of Asia- Pacific wealth management at UBS Asset Management.
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