Beijing’s move to direct household savings into equities funds will ensure a bull run in stocks this year, analysts predict

China’s decision to direct money from the nation’s vast household savings into funds that invest in equities could support a further rally in the country’s stocks, analysts said.

The China Banking and Insurance Regulatory Commission (CBIRC), the financial watchdog, published a guideline saying it would promote the conversion of household savings into long-term capital market fund. It did not say how it would do this.

Even steering a small portion of China’s 70 trillion yuan (US$10 trillion) of household savings into the funds would translate into a huge windfall for the stock market, analysts said.

“As top financial regulators plan to direct more capital to stocks, they are taking a supportive stance on the equity market,” said Zhou Ling, a hedge fund manager at Shanghai Shiva Investment. “All signs are showing that the [Chinese stock] market would turn into a bullish mode with a series of market-moving measures.”

The guideline, released on Saturday evening, is the first of a series of reforms expected to be announced this year aimed at liberalising China’s financial markets.