Wei Lili is running out of investment options. Apartment prices in her city of Wuhan are beyond her reach even after a recent property slump, and the volatileSTOCK MARKET is too great a risk.
‘It takes more than a million yuan to buy a flat, and stocks are like a roller coaster – they are too soul-wrenching for me,’ said Wei, 52, a government worker in the central Chinese city. She’s lost almost half of a 30,000 yuan ($4,800) investment in stocks, she said, declining to elaborate.
The party may be ending for Chinese investors who have seen housing prices boom over most of the past decade and gained from wagers on everything from surging commodity prices to industrial-company loans. WithTHE STOCK MARKET in a funk, lackluster prospects for an oversupplied housing market and interest rates falling, savers like Wei face a new era of lower investment returns should the recent equities rout persist.
While investors have a few more instruments to turn to than before – wealth management products and investment trusts have seen assets soar in recent years – their returns also are under pressure. That could increase the incentive to hunt for better yields overseas or in questionable fads like the bubbles in garlic and fine Pu’er tea in the past decade.
‘Chinese investors are in for a tough stretch,’ said Andrew Polk, a Beijing-based economist at the Conference Board who previously worked at the U. S. Treasury Department. ‘We are likely to see an even greater increase in capital outflows going forward and we might see some very random asset bubbles, like the ‘great garlic bubble’ in late 2009.’
This post was published at David Stockmans Contra Corner on July 31, 2015.
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