An investor sits in front of a board displaying stock information at a brokerage office in Beijing, China, in this December 2018 photo. Reuters-Yonhap
Korean investors are parking their cash in Chinese stocks again following the Chinese government's introduction of stimulus measures, leading to stock holdings reaching their highest level this year.
According to the Korea Securities Depository, Thursday, the value of stocks held by domestic investors in the Shanghai and Shenzhen stock exchanges reached $956.8 million last month, setting a new annual record. This marks an increase of $153.23 million compared to the previous month.
Including Hong Kong, total holdings of Greater China stocks in September recorded $2.99 billion, also the highest level this year.
The rebound in Chinese stock holdings last month, after four consecutive months of decline since May, is attributed to the sharp market rise.
On Sept. 24, the People's Bank of China rolled out stimulus measures, such as cutting policy rates and mortgage rates, along with lowering the bank reserve requirement ratio by 0.5 percentage points for liquidity. 800 billion yuan ($113.7 billion) will be injected as well to bolster the stock market.
The announcement attracted significant attention from foreign investors, who had previously shifted their focus to other emerging markets, such as India.
From Sept. 23 to Monday, the last trading day before Chinese National Day, the CSI 300 — an index composed of the top 300 companies by market cap listed on the Shanghai and Shenzen stock exchanges — rose by 25.06 percent.
Hong Kong's Hang Seng Index also increased about 25.21 percent from Sept. 23 to Thursday. This marks the first time that the index has soared above the 8,000 level since February 2022.
The market anticipates that the upward trend in Chinese stocks will persist for the time being.
"There is a chance the market could surpass its previous peak after reopening, with fiscal and real estate stimulus measures expected to be announced following China's National Day holiday," Meritz Securities analyst Choi Seol-hwa said.
However, market volatility is likely due to this short-term surge, especially if profit taking occurs, market watchers said. Korean individual investors have also sold 12.3 billion won ($9.28 million) worth of Greater China stocks since early September, seeking profits.
The brokerage industry believes that for the upward trend to be sustained for the long term, clear signs of an economic recovery must emerge. They emphasize that fundamental issues weighing on the market, such as the real estate slump and weak domestic demand, need to be addressed.
"Recent measures have clear limitations in driving the V-shaped recovery or helping the Chinese economy escape deflation by themselves," iM Securities analyst Park Sang-hyun said.
"However, key financial leaders holding a press conference to market stabilization measures signals a shift from China's previous lukewarm responses. This is expected to contribute to the short-term market recovery. Moreover, the likelihood of additional financial stabilization efforts, along with measures aimed at real economic recovery, has significantly increased."