China adds new investors at fastest pace in 14 months as world-beating rally boosts appeal of stocks

The number of new investors increased 47 per cent from a year ago to 1.55 million in June, the fastest pace since April last year, clearing house data shows

Citic Securities calls the dip sparked last week by the deteriorating China-US ties a buying opportunity

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A Chinese investor reads a newspaper at a securities brokerage in Beijing. China added 1.55 million new stock traders in June. Photo: EPA-EFE

Published: 4:00pm, 27 Jul 2020Updated: 10:29pm, 27 Jul 2020

New investors flocked to China’s stock market at the fastest pace in 14 months in June as mainlanders sought to cash in on the world’s best-performing major benchmark this year.

New stock accounts rose 47 per cent year on year to 1.55 million last month, according to data by the China Securities Depository and Clearing. It was the biggest gain since April 2019, when the number of new traders increased by 58 per cent. Overall, China added 7.98 million equity investors in the first half, the data showed.

China’s stocks have staged a rapid run-up over the past four months, with the benchmark Shanghai Composite Index rising as much as 30 per cent from a March low, as the Asian nation’s economy emerges from the economic fallout of the coronavirus pandemic and the central bank releases a record amount of liquidity to spur growth. It has gained 5.1 per cent so far this year.

The wealth effect has also prompted investors to snap up newly launched mutual funds and increase their leveraged stock buying.

Chinese investors are dipping into the world’s largest pool of household savings, which, according to the People’s Bank of China data stood at 82 trillion yuan (US$11.7 trillion) at the end of last year. The outstanding balance of leverage buying has meanwhile increased 33 per cent this year to as much as 1.36 trillion yuan, the highest in five years.

The addition of new investors in June brought the tally of China’s stock traders to 167.7 million, the largest such group in the world. While the total equals the entire population of Bangladesh, the army is mostly composed of individual investors that contribute to more than 70 per cent of the transactions on the mainland’s exchanges.