The Chinese stock market continues to rise even without clear economic stimulus measures or major positive news. This is interpreted as a result of individuals expanding their investment in risk assets amid record-high household savings, a low-interest rate environment, and abundant liquidity in the market.
According to Bloomberg News, the Chinese stock market has shown an upward trend due to the investment enthusiasm of individual investors. As of 3:40 p.m. on the 13th, the CSI 300, a representative stock index in China composed of the top 300 companies listed on the Shanghai and Shenzhen stock exchanges, recorded 4,163 points, showing an increase of about 19% compared to the low in April.
Low deposit rates and limited investment alternatives seem to have provided individual investors with the motivation to engage in stock transactions. According to the Chinese economic newspaper Ikai Global, the margin balance for stock transactions on the Shanghai and Shenzhen stock exchanges has been steadily increasing since June, surpassing 2 trillion yuan (about $275 billion, 380 trillion won) on the 12th, the highest level in 10 years. Margin balances are one of the key indicators of investment enthusiasm. The average monthly trading volume on regional exchanges has also shown an increase for three consecutive months.
The upward trend is particularly pronounced in small-cap stocks. The CSI SmallCap 500 index, composed of 500 small and medium-sized enterprises listed on the Shanghai and Shenzhen exchanges, recorded a one-year revenue of 36%, remaining in the overbought zone. Shinda Securities forecast that individual investors' capital inflow will accelerate in the second half of this year due to expectations for the government's five-year development plans and expanding liquidity in the market. Previously, liquidity supply in China increased by 4.6% compared to the same month last year, marking the largest growth rate in two years.
Experts believe that abundant liquidity can absorb selling pressure from short-term profit realizations. Zhou Nan, the representative of Shenzhen Longhui Fund, analyzed that "as the Shanghai Composite Index approaches the 3,700 mark for the first time in four years, some selling may occur," but "the possibility of a large-scale adjustment is low."
However, there are concerns that the upward trend may be limited if corporate performance and unemployment rates do not recover. Sean Meng, a director at Beijing-based investment bank Chanson & Co., stated, "The stock price movements vary by industry," and noted, "It is difficult to say that there is a structural improvement across the entire market."
Nevertheless, there are signs of improvement in U.S.-China trade relations, and individual investors are gaining momentum, leading to an overall positive trend in the stock market. Citigroup and Goldman Sachs have recently upgraded their outlook for the Chinese stock market, and local insurance companies are also increasing their proportion of stocks in their funds. The China International Capital Corporation (CICC) also predicted that "as household investment intentions have increased, this rally is likely to continue for the time being."