Chinese Banks Using Stimulus Funds to Speculate in Stocks?
I see under no circumstances how this could possibly be a good thing.
Chinese companies may be using
record bank lending to invest in stocks, fueling a rally that’s
made the benchmark Shanghai Composite Index the world’s best
performer this year, according to Shenyin & Wanguo Securities Co.
As much as 660 billion yuan ($97 billion) may have been converted by companies into term deposits or used to buy equities, Li Huiyong, Shanghai-based analyst at Shenyin Wanguo, said in a phone interview today, citing money supply figures.
China’s banks lent a record 1.62 trillion yuan in January as part of a government drive to stimulate the world’s third- largest economy, while M2, the broadest measure of money supply, climbed 18.8 percent from a year earlier. The Shanghai Composite has surged 29 percent since the start of 2009, compared with a 10 percent decline in the MSCI World Index.
“Part of the liquidity flowing into the stock market could be from companies using borrowed funds to invest in the stock market instead of working requirements,” said Li.
He arrived at the 660 billion yuan figure by subtracting M1,
which includes cash and demand deposits, from M2.
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