Record Q1 inflows keep China stocks riding high

If you’re looking for a sign that the Chinese market still has a lot of upward momentum take a look at the fact that the recent crackdown on margin financing and additional shorting opportunities only sent the market down one day. This became a nice buying opportunity for those who realized the moves added liquidity to the market.

This week, Reorient Financial Markets, an Asia focused investment bank, sees first-quarter record inflows into the stock market from both banks and individuals as a sign that the market has a lot more room to grow.

In its week ahead note released Sunday, Reorient said that central bank data reveals an unprecedented jump in equity investments by small- and medium-sized banks. In the first quarter alone, banks invested more than 8 trillion yuan, compared with 6.5 trillion yuan in all of 2014. Banks are putting so much money into the stock market every month, about 600 billion yuan, that it stands at about half of the 1.0 – 1.2 trillion new yuan loans provided to the real economy each month.

But banks aren’t the only ones getting in on the action. Retail investors deposited a record amount of cash into their brokerage accounts at a time when weekly securities trading accounts openings doubled, said Reorient. The gross balance of deposits into custodial bank accounts for brokerages jumped nearly 750 billion yuan in March for a total of more than 10 trillion yuan. Reorient said this was the biggest in history.

The firm said “the strong account opening will continue to support the high turnover of over RMB 1 trillion for May.”

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Categories: Asia Unhedged