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Individual investors in China are capitalizing on the recent rally in mainland stocks by shifting their funds from savings accounts and wealth management products into the stock market.
One investor was seen selling large-denomination certificates of deposit with a 3.85% annual interest rate at a significant discount, with the new buyer projected to earn an annualized return of approximately 4.87%. This contrasts with the roughly 2% annual interest rates currently offered on three-year CDs of at least CNY200,000 (around USD27,910) by banks.
The Chinese stock markets have been trending upward. The Shanghai Composite Index reached a decade-high intraday peak of 3,745.94 on August 18 and has continued rising, hitting 3,870.32 as of 10:30 a.m. today. Meanwhile, the Shenzhen Component Index and the ChiNext Index have hit their highest points in three years.
“Capital naturally seeks higher returns,” said Wang Pengbo, a leading financial analyst. “With the sustained growth in the Chinese markets, some investors with higher risk tolerance are shifting part of their savings into stocks to pursue better yields.”
Despite declining interest rates, investors have been moving their funds out of certificates of deposit since last year, primarily into wealth management funds, according to Wang Jian of Guosen Securities. However, the impressive performance of the stock market has increased investors’ risk appetite, resulting in more funds flowing into equities just last month.
A wealth management executive from a Chinese joint-stock bank remarked that clients are increasingly redeeming their wealth management products. “The market has performed so well that many clients are eager to try their luck with stocks,” they said.
In response, financial institutions are now recommending products with some exposure to equities to cater to customers willing to accept certain risks. Meanwhile, traditional savers remain cautious, an industry expert explained.
According to Cheng Gang, an analyst at Soochow Securities, a large-scale influx of retail funds has not yet materialized based on recent new account openings, indicating that the current rally may still have room to grow.
If a significant influx of retail investors occurs, it could cause the stock indexes to surge further or trigger a short squeeze—a sign that the current boom might be approaching its peak.
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