Analysis: Trickle, not flood, seen when overseas stocks open to Chinese

Wed May 29, 2013 5:13pm EDT
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By Pete Sweeney and Samuel Shen

SHANGHAI (Reuters) - Signals Beijing is preparing to unleash the buying power of Chinese individual investors on overseas markets may have some stock brokers salivating at the prospect the new money can add another leg to Wall Street's record-breaking rally.

But reality may be different. Chinese investors so far have shown little enthusiasm for owning foreign stocks under limited investment schemes available in China and are more likely to channel their money into real estate.

The central bank said in January that planning for the trial of a domestic individual investor program would be a top priority this year and other statements, including from senior officials this month, supported allowing more freedom for money to flow out of the country.

That has raised expectations that a wave of fresh funds may be about to head into global markets.

"This may unleash a significant and growing amount of investment capital held by Chinese individuals into global markets including global stock markets," George Askew, U.S.-based equities analyst with Stifel Nicolaus & Co. wrote in a research note distributed to clients.

Chinese savers had more than 44 trillion yuan ($7 trillion) in personal deposits in Chinese banks in April, central bank figures show.

If they invest 10 percent of their savings in foreign stocks - a conservative measure of portfolio diversification - they would spend some $724 billion in offshore bourses.

Although overseas stock markets - in particular those in the United States - have strongly outperformed Chinese indexes, mainland investors have been reluctant to own shares in foreign companies and analysts say regulatory tweaks alone are unlikely to change this attitude.   Continued...

An investor reads information displayed on an electronic screen at a brokerage house in Shanghai July 30, 2012. REUTERS/Aly Song