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Interest rate drops as Chinese turn to stocks

A soaring stock market has led to record-low interest among Chinese savers for putting their money in bank accounts, state media reported yesterday.

A new central bank survey showed an all-time high of 30.7 percent of the public saw stocks as their most important financial asset in the first quarter, up from 19 percent in the fourth quarter of last year, Xinhua news agency said.

By contrast, 59.4 percent of the public regarded bank deposits as more important, the lowest level on record, said the survey, which was based on data collected from 20,000 respondents.

The results of the survey were released as a senior securities market regulator warned against risks in the stock market.

"There are risks in the stock market and you should think carefully before entering," Fan Fuchun (范富春), vice chairman of the China Securities Regulatory Commission, was quoted as saying by the China Daily Web site.

He urged investors not to jump into the equity market blindly or make investment decisions based on rumors, the paper said.

Share prices on the key Shanghai index are up well over 200 percent since January last year, while on the Shenzhen A-share market index, prices are up more than 280 percent.

In the first three months of the year punters in China opened 4.79 million new accounts, a 56 percent increase from the 3.08 million in the whole of last year, Xinhua reported, citing government statistics.

Last week, the number of new accounts in China's two exchanges in Shanghai and Shenzhen registered a record 252,000 new accounts in one day alone, the China Securities Regulatory Commission said.

This marks a fundamental shift in the mentality of Chinese savers, said Huang Fuguang (黃福廣), a finance professor at Tianjin-based Nankai University.

"Chinese people have always been keen on putting their money in banks, but soaring housing prices and low interest rates have made many realize that the yield on bank deposits is simply too low," Huang told Xinhua.

"That's why people are turning to more lucrative investments, like stocks and shares," Huang said.
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