China’s stock woes: funds shun equities for bonds, ETFs, luxury homes in downbeat market

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China’s moribund onshore equities are struggling to attract investors, with many turning to bonds, overseas ETFs and luxury homes instead

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Zhang Shidongin Shanghai

Published: 8:00am, 24 Aug 2024Updated: 11:10am, 24 Aug 2024

Antony Xu has steered clear of stocks as his investment portfolio has been unprofitable over the past few years.

“For now, I’d rather put my spare money in banks’ wealth management products,” said the 47-year-old accounting executive in Shanghai. “The returns are low, but at least I can make some money. I’ve been suffering paper losses from stocks for years and there’s no way I’ll increase my investments in the near term.”

Luring investors such as Xu to China’s US$8.2 trillion stock market has proved to be daunting for President Xi Jinping and financial regulators.

Four months after the State Council, China’s cabinet, unveiled a nine-point document aimed at restoring investors’ confidence and attracting long-term funds, the market is back in a downward spiral after a relief rally. There are telltale signs of investors shunning stocks: turnover on the Shanghai and Shenzhen exchanges has plunged to a four-year low, the benchmark CSI 300 Index has lost a tenth of its value from this year’s high and quick sector rotations dominate trading.

Instead, investors have been scooping up other assets from bonds to exchange-traded funds (ETFs) tracking overseas equities, and luxury homes in tier-one cities. The frenzy is in sharp contrast to the flagging stock market, with the yield on the benchmark government bond sliding to a record low, ETFs tracking underlying US and Japanese stocks trading at a premium to their net-asset values and new luxury homes selling out.