China's state-run media are trying to do something the securities industry has failed to accomplish for much of the past three years: get the world's biggest population to buy more stocks.
The official Xinhua News Agency published at least eight articles this week advocating equity investing after similar stories appeared in the People's Daily newspaper and on state-run television last month, part of what Everbright Securities Co says is an increased government push to bolster the market.
Authorities have also cut trading fees, made it cheaper to open new accounts and organised investor presentations by the biggest listed banks in the past two weeks.
Huang Shi got the message. The media campaign "did influence my purchase," Huang, a 26-year-old who works in the finance industry in the northeastern city of Harbin, said after shifting more than 20,000 yuan ($3257) into shares last week. "Also, our stock market had slumped for so long."
Chinese policy makers are trying to rekindle interest in stocks after the Shanghai Composite Index lost $460 billion of market value in the three years through May, the most worldwide, and investors liquidated almost five million trading accounts.
A shift towards equities may help the government reduce speculative investing in the property market and curb risks tied to lightly regulated wealth-management products, whose assets rose to a record $2.1 trillion in the first half.
The government's promotion of shares, which follows forecasts for gains this year from brokerages including Citigroup Inc and Morgan Stanley, may already be having an impact.
The Shanghai Composite has gained about 12 per cent since the end of May, fuelled by speculation the world's second-largest economy is weathering its real estate slump.
After shrinking for 12 straight weeks through August 8 to the lowest level since March 2010, the number of equity accounts containing funds is rising while the pace of new account openings has doubled since May.
China is also seeking a buoyant stock market as the country of 1.3 billion people opens up further to foreign investors through an exchange link with Hong Kong scheduled to start in October. The program will allow a net 23.5 billion yuan of daily purchases between Asia's biggest equity markets after Japan.
"The government is indeed encouraging stock investment," Zeng Xianzhao, an analyst at Everbright Securities, said. "They need the market to be vibrant to encourage foreign funds into the country."
Xinhua's commentaries and news stories on equities included headlines such as "China needs a bull market with quality" and "How could the stock market be invigorated?"
A common view in China is that the country's "new phase of economic and social development will certainly bring precious confidence and strong support to the stock market," the news agency said on August 31. Reports from the People's Daily and China Central Television last month showed how money was flowing into stocks from the property market.
China said this month it would reduce fees by more than half for individuals and institutions opening share accounts, while the futures exchange cut margin requirements for equity-index contracts on September 1.
Regulators also announced plans to allow investors to consolidate their accounts covering stocks, mutual funds and other securities. The Shanghai Stock Exchange said this week it was hosting presentations by 14 listed banks to improve transparency and cultivate investor relationships.
"The government wants to change peoples' outlook," Ronald Wan, the chief China adviser at Asian Capital Holdings Ltd in Hong Kong, said. "A strong equity market is a prerequisite for healthy capital-market reform in China."
The combination of bullish coverage from state media and surging demand from local investors didn't prevent shares from tumbling five years ago. While the nation's two largest financial newspapers published articles saying the rally would continue and new-account openings surged to an 18-month high in July 2009, the Shanghai Composite lost 23 per cent over the next 12 months.
Volatility in Chinese equities now may deter some investors from increasing holdings, according to Credit Suisse. The Shanghai Composite has posted average annual swings of 44 per cent in the past decade, while wealth management products offer annualised returns of about 5 per cent.
Chinese stock valuations are still low relative to history, which gives the market room to rally further as the economy improves, said Roxy Wong, a Hong Kong-based senior portfolio manager at Lombard Odier & Cie, which oversees about $169 billion worldwide.
"You might even start to see retail money redirected to equities after years of chasing real estate," said Michael Shaoul, the New York-based chairman of Marketfield Asset Management LLC, which oversees about $18.5 billion.
