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Deposit flow into stock markets slows

By Dai Yan (Chinadaily.com.cn)
Updated: 2007-07-11 09:17

Continuous corrections in the Chinese stock markets in June slowed the
pace of money flowing out of banks and into the markets, according to
latest statistics from the Shanghai headquarters of the central bank.

In June, movement into the stock markets slowed for the first time in
five months. Domestic financial institutions in Shanghai had received new
deposits of 6.09 billion yuan (US$801 million) in June. This figure was
still up 5.07 billion yuan year-on-year, according to the statistics.

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Enterprise renminbi deposits in Chinese financial institutions in
Shanghai increased 76.93 billion yuan during the first half of the year,
28.25 billion yuan more than the increase during the same period of last
year. The increase in fixed enterprise deposits was only up 2.21 billion
yuan from a year ago, while that in current enterprise and household
deposits rose by 26.04 billion yuan and 2.5 billion yuan respectively.

A rise in current deposits indicates enterprise success and efficient
capital circulation, the Shanghai headquarters noted. Enterprises and
citizens were also active in stock trading and investing in the real
estate market in the first half of 2007, contributing to higher current
deposit rates.

Enterprise deposits in domestic financial institutions in Shanghai
increased 66.12 billion in June, of which 94.3 percent were current
deposits, up 120.52 billion yuan from the previous month.

Banks are preparing for significant fluctuation in deposit levels.

Fluctuation will put commercial banks under pressure and raise the price
of capital, said Lian Ping, chief economist at the Bank of
Communications. Large banks will have to prepare more excess reserves,
reducing benefits to fund management. Small banks will be alert to the
upper limit of the deposit-loan ratio with unstable capital sources.

(For more biz stories, please visit Industry Updates)

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