Chinese Mandarin - Money flows from stocks to property

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BIZCHINA / Center

Money flows from stocks to property

By Jin Jing (China Daily)
Updated: 2007-07-31 09:25

An increasing amount of investment capital is flowing from
the?unpredicable Chinese stock market to the relatively stable real
estate markets in major cities like Shanghai, Beijing and Shenzhen,
according to several banks and property consultancies.

Low- and medium-level residential properties have been attracting the
bulk of the funds diverted from stocks, while luxury residential houses
and office buildings are taking in a much smaller share, according to a
recent survey by Shenzhen-based Worldunion Properties Consultancy (China)
Limited.

The survey, which covers 16 real estate projects in Shenzhen, Beijing and
Tianjin, estimates that funds diverted from stocks accounted for around
50 percent of the total transactions in low- to medium-priced residential
properties from October 2006 to June 2007, 10 to 20 percent in luxury
apartments and about the same percentage in office premises.

"The volatility of the stock market after the stamp tax hike in late May
has also increased the potential risks and reduced the returns of stock
investment, prompting many risk-averse investors to shift their focus to
the property market," the Worldunion report said.

"It can be seen from the weak and uncertain performance of the stock
market and the strong performance of property prices in various major
cities," the report said.

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Housing prices in 70 large-and medium-sized cities in China continued to
rise in June, up 7.1 percent over the same period last year, while the
Shanghai Composite Index dropped 7 percent that month.

"From my experience in other markets, the risks of investment in real
estate are relatively lower than that in the stock market," said Mao Zhi,
a professor at China Real Estate Index Research Academy.

Some are even selling their stocks to pay for house loans before the
recent lending rate hike of 27 basis points. These funds have indirectly
flowed into the real estate market, analysts said.

"The interest rate hike is not expected to have a negative impact on the
property market. The gap between long-term deposit and lending rates
narrowed only 9 basis points after the rate adjustment, showing that the
measure is not targeting the real estate market," said Li Maoyu, an
analyst at Changjiang Securities.

At the macro level, the fund flow trend from stocks to real estate is
reflected in the sharp increase in bank loans, economists and market
analysts said.

(For more biz stories, please visit Industry Updates)

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