Chinese Stock Market in Danger of Collapse: State Media
Chinese Stock Market in Danger of Collapse: State Media

An employee of a Shanghai trading house speaks
An employee of a trading house speaks into a microphone as he comments on the stock market, in Shanghai on Aug. 18, 2010. (Philippe Lopez/AFP/Getty Images)

Chinese investors’ confidence seems to have gone, with more and more people closing their investment accounts, state-run media said.

According to the latest data-point released by Beijing-based China Securities Investor Protection Fund Limited, trading accounts for clients at securities brokerages saw an outflow of 90.3 billion yuan (US$14.1 billion) in the first week of July, and 30.3 billion yuan (US$4.7 billion) in the second week, even higher than the rate in June.

In June, the total outflow was 196.7 billion yuan (US$30.8 billion), according to a July 9 post by Hong Kong market data provider CapitalVue, which cited data from the China Securities Investor Protection Fund Limited. 

With the current free-floating A-Share market capitalization at $1.9 trillion, the outflow in June represented 1.6 percent of the total, a huge 21 percent on an annualized basis, based on Shanghai Stock Exchange online sse.com

The data represents the flow of capital in and out of individual investors’ securities accounts, but does not include B-share accounts, short-selling or stocks held on margin. 

China Economic Weekly online, which belongs to the Communist Party mouthpiece People’s Daily, quoted this data on July 17, saying such a drop is a disaster for the stock market and for the entire economy.

If this trend of investors closing their accounts continues, the Chinese stock market will be completely destroyed, it said.

The report asked why people are closing their accounts, and whether someone should take responsibility for the damage caused to investors.

“The Chinese stock market has entered its most critical moment. Trust is now more valuable than gold. However, only the trust from investors is worth more than gold (…) ” the report said. 

Judging by declining stock-prices and outflows, investors have already given their vote of no-confidence in the Chinese economy.

Read original Chinese article.

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