According to China’s market regulator, around 220 million people invest in stocks. That’s less than 20 per cent of the country’s adult population. In contrast, more than 60 per cent of adults in the US, or about 162 million Americans, own stocks, according to American analytics firm Gallup.
Mr Kelvin Tay, chief investment officer for South Asia Pacific at UBS Wealth Management, sees the shift in asset classes as part of a broader trend observed in other countries.
“Traditionally, housing has been the preferred asset class for investments (in China), accounting for as much as 70 per cent of household balance sheets,” he said, drawing parallels to asset shifts in Japan and the US following property market downturns.
“In China, as the bond market doesn’t have the depth and breadth as the US, the only clear asset class that investors can shift to is the equity market. Investing in stocks is also relatively more affordable than the property market, as the financial outlay is much lower. ”
However, he noted that stock rallies are unlikely to drive short-term consumption, especially with the property market being a longstanding investment vehicle in China. “White goods (major appliances) and durable goods consumption will only pick up when the property market improves,” he explained.
At the same time, should the stock market turbulence settle and persistent gains emerge, analysts say it could hold much promise.
“(I see) continued sustained upticks in the stock market as an essential piece for China to catalyse the transition into a consumption-driven economy,” said Mr Lee Kok How, an affiliate lecturer at Singapore Management University (SMU) specialising in China’s business landscape.
As opposed to short-term speculation, Mr Lee believes that cautious participation by young people in the stock market will contribute to “gradual and sustained upticks”, which could aid the consumption drive as they reap the dividends and potentially spend more.
