The excitement over China’s reopening that drove the nation’s benchmark stock index within a hair of a bull market has so far failed to spark a substantial inflow of money from individual investors.
(Bloomberg) — The excitement over China’s reopening that drove the nation’s benchmark stock index within a hair of a bull market has so far failed to spark a substantial inflow of money from individual investors.
Equity mutual funds raised 31.6 billion yuan ($4.6 billion) in the past two months, less than a third of the amount in the same period last year, according to data from consultancy Z-Ben Advisors Ltd. While the figures inched higher from December they’re still well below record levels in 2020-21 when retail investors were shifting into professionally managed products.
China’s Rapid-Fire Stock Rally Seen Giving Way to a Slow Grind
Investors remain cautious over market volatility after a broader selloff in early 2022 due to China’s strict Covid Zero lockdowns. The recent reopening frenzy helped lift fund issuances to a five-month high in February, given that fundraising typically lags market performance by at least a month.
Despite that rise, retail participation remains lackluster, and the benchmark CSI 300 Index slumped 2.1% last month.
The National People’s Congress starting this weekend may provide catalysts for the next leg up, traders say. Chinese households sitting on excess savings after the pandemic could plow as much as 600 billion yuan ($86.8 billion) into the equity market, according to UBS Group AG.
China’s Upcoming Congress Spurs Optimism on Mainland Stocks
“New fundraising is a critical source of additional inflows into the market, which tends to bring about a virtuous cycle of more gains and still more more funds,” said Liu Yiqian, an analyst at Shanghai Securities Co. “There’s reason to expect that fund raising will continue to pick up in March,” he said.
Investing in risk assets may not be a priority as the Covid era ends, however, with many opting for revenge spending on goods and travel, or prepaying mortgages to take advantage of low rates. In the stock market, traders have turned to more trendy plays like ChatGPT amid the recent decline.
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