Chinese stocks at decade high lure hesitant retail investors

SHANGHAI (Reuters) -Chinese stocks are at decade highs after a rally powered by support from state-backed institutions and bigger investors, with retail money slowly making their way back into shares providing a fresh tail wind.

Investors have so far shrugged off the anaemic economic recovery in China and, while Shanghai stocks are at levels not seen since 2015.

Analysts point to relatively low valuations and ample dry powder as reasons for the rally to continue. They expect retail investors to gradually rotate out of low-yielding deposits into stocks.

The Shanghai Composite Index is up about 25% from April lows.

Here are some charts on China's stock markets.

1/ SOARING MARGIN FINANCING

Outstanding margin financing reached 2.18 trillion yuan ($304.77 billion), the highest level since mid-2015, while the earnings yield for Chinese stocks are higher than those from Chinese bonds.

2/ COMING IN HOT

Stock investments by Chinese insurers, mutual funds and ETFs are up as regulators nudge institutional investors into the share market. The metrics suggest that the rally this time around is being driven by local long-term investors and not fast money.

3/ WEALTHY INVESTORS ON THE WAY

Newly-registered private securities funds in July hit the highest level by size since late 2021, suggesting high net worth investors are also entering the market.

4/ BUT RETAIL AND FOREIGN MONEY STILL ON THE FENCE

Data shows retail investors are not rushing to open new accounts, while foreign investors have also not invested heavily in China onshore stocks so far this year.

That also suggests, according to some analysts, there is still ample money sitting on the sidelines that could jump in.

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($1 = 7.1529 Chinese yuan renminbi)

(Reporting by Shanghai Newsroom / Samuel Shen in Shanghai Editing by Ankur Banerjee and Shri Navaratnam)

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