UBS Expects Retail Inflow Of Around $87B Driving Next Leg Of Chinese Stock Rally: Report

  • According to UBS Group AG UBS, China's stock market may see an inflow of around 600 billion yuan ($86.8 billion) of excess savings from the nation's households.
  • The potential upside is "significant." In 2014-2015, 2 trillion yuan of retail inflows helped a surge of about 150% in onshore Chinese shares, Bloomberg reported citing strategists.
  • Due to curbed spending during the pandemic, Chinese households have around 8 trillion to 10 trillion yuan in excess available deposits. Keeping at par with other countries, around 6% of the savings end up in equities investment.
  • "With the A-share market showing some positive momentum in recent quarters, the conditions are ripe for retail inflows to pick up in the next 3-6 months," the strategists wrote. 
  • Some analysts are cautious about the probability of overstated figures. Consumers may tightly grip their wallets until the economic recovery translates into visible income gains. 
  • The report further quoted the strategists that the actual timing of inflows would hinge on a slowdown in deposit growth and an improvement in consumer confidence. 
  • The latest data show China's economy is rebounding fast after COVID restrictions were lifted last year.
  • According to UBS, retail flows typically prefer cyclical, including software, financials, and tech shares, over food and beverage. The onshore market is set to benefit the most from additional retail inflows, while Hong Kong's market could also see increased investment via the southbound trading links, the Bloomberg report added.
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