BIZCHINA / Weekly Roundup
Striking a strange balance
By Hu Yuanyuan (China Daily)
Updated: 2007-05-30 10:14
Though she refuses to disclose exactly how much she made from stocks last
year, she says her biggest single-day gain could have been more than
200,000 yuan. And the first thing that came to her mind when she thought
of re-investing that money was an apartment.
Since Wan was born in Wuhu, East China's Anhui Province, she decided to
buy an apartment there, so that she could spend her post-retirement life
comfortably in familiar surroundings. But why Wuhu and not Hefei, the
capital of Anhui? Because Wuhu still has a lot of room for growth, she
says. And she is right, for the average property price in the city jumped
nearly 50 percent in the six months after she bought her apartment.
Wan says: "After its fast and continuous rise, the stock market has
become more risky. So investment in property is a much safer bet, even
though the return might be a bit lower." Also, buying property is the
ideal way to fight inflation.
Yang Zhen, a 28-year-old reporter, corroborates Wan. He too has made a
considerable amount of money from stocks, and is now trying to buy a good
apartment. "Trading in stocks is just a means to earn more money to buy a
house," he says. "And this is the right time to try my luck because the
index won't always climb up like this."
Another lucky man is Xiao. He is ready to get married, and hence cannot
wait to buy an apartment. "The property price in Beijing is still
growing, and fewer apartments are available today within the Fourth Ring
Road," he says. So he has to buy an apartment as soon as possible.
This "peaceful co-existence" of the stock and property markets will
continue for some more time, says CB Richard Ellis Director Peter Lin.
According to the US property consultant firm's executive, the red-hot
stock market's impact on the property sector will not be obvious in the
short term. "China's stock market is at a pretty high level now, with the
possible profit margin shrinking and potential risks increasing. Thus,
investors may quickly evacuate the stock market once it slides. But
property investment is usually a long-term behavior."
Lin argues that China's property prices will continue to rise over the
next three to five years, fuelled by the galloping economy and strong
demand.
Cathy View Courtyard Residencies Marketing Director Chang Lei says the
main reason why the stock and property markets are sizzling at the same
time is the limited number of investment channels in China. "Since bonds
and insurance, popular investment instruments in mature markets, have not
caught on in China, people still pin their eyes on stocks or houses,"
Chang says.
In April, total household deposits in China dropped to 17.37 trillion
yuan ($2.27 trillion), a decrease of 167.4 billion yuan ($21.88 billion)
from the previous month, the Shanghai Securities News reported. And they
may drop further this month as investors rush to withdraw money from
their savings accounts to pump them into the stock market.
Although domestic banks have launched their own wealth management
products, they can hardly draw away investors from the bourse because the
profit margin they offer is barely higher than those for deposits.
The government, too, has realized that most of the liquid cash is flowing
into stocks because of the lack of investment channels, and has taken
measures to create more choices for investors.
In mid-May, the China Banking Regulatory Commission (CBRC) widened the
scope of investments under the Qualified Domestic Institutional Investors
(QDII) scheme.
Also, it has allowed mainland commercial banks, which offer overseas
wealth-management business, to invest in a wider range of assets,
including equities and equity funds authorized by a supervisory authority
with which the CBRC has signed a memorandum of understanding.
These measures could yield results in the long run, but for now it seems
to be the day of stocks - and property, too.
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