Shares fall from favor with investors: PBOC

By Zhang Fengming  |   2008-6-26  |     NEWSPAPER EDITION

RESIDENTS are dumping stocks and funds while the share market languishes, and property buying has hit a record low, China's central bank has found in its latest survey.

Entrepreneurs are also feeling the pinch of higher lending costs and are struggling to make profits, the People's Bank of China found in another survey.

About 16.8 percent of 19,600 respondents surveyed said they favored buying stocks and funds, down 10.8 percent since last quarter, the bank said on its Website yesterday, quoting a survey of 49 cities in late May.

The figure has dropped for three straight quarters.

The benchmark index Shanghai Composite Index has slid more than half from last year's record high.

The attraction of savings has kept rising for three straight quarters amid the lackluster capital market. About 38.1 percent of respondents said they prefer savings, up 12.7 percentage points from the third quarter of 2007.

About 59.8 percent of respondents said their main household financial assets are savings, up 2.8 percent from a quarter ago and up 7.5 percent from a year ago.

Fewer residents expected to earn more in the next quarter. About 25.2 percent of respondents said they expected a salary rise in the future, down 2.2 percent from a quarter ago and down 4.1 percent from a year ago.

Interest in buying property has slumped to a record low level. The devastating 8.0-magnitude earthquake in Sichuan Province on May 12 also dampened real estate in the quake-hit areas.

The earthquake also increased residents' awareness of insurance products.

About 70 percent of respondents said they were more willing to buy life insurance products. About 7.5 percent rated insurance as the best investment.

The central bank has already increased interest rates, raised reserve requirement ratios for banks and tripled stamp duty on share trading to curb market speculation.

In a separate survey of 5,530 entrepreneurs in the second quarter, 27 percent said banks credit was relatively tight - a record number in the past three years. About 36 percent of entrepreneurs said the lending rate is "relatively high."

The central bank raised banks' reserve ratio to a 23-year high of 17.5 percent to soak up liquidity. Banks are charging more interest on loans, leading to higher borrowing costs for companies.

However, confidence among Chinese bankers recovered for a third straight quarter as concerns that the economy may overheat eased, said another survey by the central bank.