China is witnessing a stock investment fever among
residents due to the continuous bullish stock market. In April, household renminbi deposits decreased by 167.4 billion yuan (US$21.7
billion), compared with a 60.6 billion yuan increase during the same period last
year, according to the central bank.
red-hot stock market has grown by more than 50 percent this year after doubling
last year. Reduced bank deposits suggest a large amount of money is being
invested in the capital market, according to the central bank. More than 70
billion yuan was transferred from savings accounts in Shanghai to stock trading
accounts in the first four months of this year, the Shanghai branch of the
People's Bank of China estimated Saturday.
The growth rate of Chinese household deposits is lower than that of
non-banking institutions. Investors are rushing to withdraw money from bank
savings accounts and pump them into the stock market. China's increment of
renminbi deposits hit 444 billion yuan at the end of April, down by 13.3 billion
yuan year on year. In the same month, renminbi savings balance with
Chinese banking institutions was 35.9 trillion yuan, up 15.7 percent from April
2006. During the first four months of 2007, renminbi deposits increased 2.3
trillion yuan, a decrease of 73.7 billion yuan in growth year on year. The
increment of deposits with non-banking institutions was 280.7 billion yuan, up
88.7 billion yuan year on year.
China's inflation eased in April, but barely meeting the government's target
of three percent, increasing the pressure on the central bank to raise interest
rates. The Consumer Price Index, a barometer of inflation, rose three
percent year-on-year, down from 3.3 percent in March, the National
Bureau of Statistics said on Monday.
The figures upped the pressure on the People's Bank of China to hike interest
rates as the country's real interest rate has been kept in negative territory.
China's benchmark one-year deposit rate stands at 2.79 percent and interest
income is subject to a 20 percent tax.
In April alone, the Shanghai Stock Exchange and the Shenzhen Stock Exchange had 4.79 million new A-share trading
accounts, exceeding the total number of new stock accounts opened in the past
two years. This brought the total number of stock trading accounts on the two
bourses to 993.95 million.
According to a monthly report jointly produced by Shanghai Securities Journal
and Shenyin Wanguo Securities, a record 250 billion yuan was ready for stock
trading in April, bringing the total on the A-share market to 980 billion yuan.
The continuous bank savings diverted to stocks will not have a big compact on
banks in a short term, for China's money supply is sufficient at the time, said
analysts. However, if household deposits as a stable loan source continue to
flow out, it will affect banks' operation stability. The ratio of loan to
deposit with Chinese banks is 68 percent, much lower than the upper limit of 75
The investment spree has aroused concern from the industry watchdog. In a
notice released on Friday, the China Securities Regulatory Commission urged stock exchanges,
securities dealers and related authorities to educate investors about the risks
of stock market investment. These institutions must make investors understand
that stock markets are risky and they should be cautious in entering the market,
especially those who use all their savings or mortgage their apartments for
loans to invest in stocks, the notice said.
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