China Stock Accounts Jump as Inflation Erodes Savings
Investors opened the most accounts to trade China stocks since November as accelerating inflation threatened to erode savings.
A total of 432,897 trading accounts were created last week, a fifth weekly increase and the highest level since the five days ended Nov. 27, data from the China Securities Depository and Clearing Corp. showed.
“Many are opening accounts because they wouldn’t want to be left out when the market moves,” said Hao Hong, Beijing- based global equity strategist at China International Capital Corp., by e-mail today. “Negative real rates are also a factor.”
China’s inflation rate accelerated to a 2.7 percent pace in February, the fastest in 16 months, after food prices climbed and industrial production rebounded. Consumer prices surpassed the 2.25 percent that banks pay on 12-month savings deposits.
The benchmark Shanghai Composite Index has declined 4.5 percent this quarter, the sixth-worst performance among 93 global stock measures tracked by Bloomberg, after the central bank twice ordered lenders to set aside more money as reserves to slow the economy.
China’s stocks may gain in the “medium term” on the prospect of more fund flows as real interest rates turn negative, said JPMorgan Chase & Co.
“The threat of wealth erosion should encourage a higher allocation of funds toward equity markets,” Jing Ulrich, JPMorgan’s chairwoman for China equities, said in a March 26 report.
A joint survey by SYWG BNP Paribas Asset Management Co. and China Business News last week found that 54 percent of respondents are considering shifting part of their savings into equities due to accelerating inflation, compared with 40.4 percent in the prior week.
“The stock market has been rebounding and the wealth effect is drawing new investors,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai. “There are also signs that accelerating inflation has prompted savings to go into equities.”