Chinese stock volatility's family wealth impact limited: CICC

BEIJING - The ramifications of China's stock market volatility on household balance sheets are manageable given the size of families' massive deposits and property valuations, a leading investment firm said Monday.

After the recent market slide, "the overall household balance sheet has only incurred limited damage," China International Capital Corporation (CICC) said in its latest research report.

China's stock market was among the world's best performers earlier this year, with the benchmark Shanghai Composite Index (SCI) up more than 150 percent in 12 months, partly fueled by margin trading. However, the index recently lost about 30 percent in less than a month from a June 12 peak, as margin traders unwound positions and some investors cashed out.

At its recent peak on June 12, free-float market capitalization in the domestic A-share market reached 29.1 trillion yuan ($4.76 trillion), around 80 percent of which are held by retail investors. Therefore, the Chinese household held around 23.3 trillion worth of equity paper wealth at the height of the market. This value declined by 6.8 trillion yuan, or around 30 percent, noted the report.

The wealth destruction is "well-cushioned" by 53 trillion yuan of household deposits and another 40 trillion of non-equity and non-property assets, said the CICC.

"Furthermore, the equity holding of Chinese households is only a small fraction of their real estate assets, and the balance sheet impact of a 30-percent loss in equity investment is equivalent to damage caused by a meager 3-percent swing in property prices," even using the conservative estimate of total household real estate assets by China Southwestern University of Finance and Economics, it added.