Recently, the Chinese stock market has been near frenzy, experiencing a sudden plunge after a sustained rise. Many investors had poured all their savings into the stock market, with a significant amount even using borrowed funds for speculation. According to sources from banks, on the last trading day before the “National Day” holiday, one bank’s retail line lost approximately 4 billion yuan in deposits, with over 35% flowing into the stock market.
On October 8th, the A-share market’s total turnover exceeded 3.45 trillion yuan. By the morning of October 9th, the Shanghai Composite Index fell by 5.30%, the Shenzhen Component Index dropped by 6.19%, and the total turnover in both markets reduced by 500 billion yuan compared to the previous day’s morning session.
The significant volatility in the securities market has also led to adjustments in bank deposits and cash management products.
According to “21st Century Economic Report” on October 9th, in response to the recent surge in stock trading volume, banks have held internal meetings to unify deployment measures for bank-securities transfers, fund subscriptions, and redemptions. A retail banking source revealed that out of the 4 billion yuan lost in deposits in a single day, over 35% had flowed into the stock market.
Apart from the loss of retail deposits, there has been noticeable congestion in bank wealth management redemption services.
Both Xingye Bank and Ping An Bank announced the temporary suspension of quick redemptions on certain cash management products around the two trading days before and after the “National Day” holiday, citing customer redemptions exceeding the internal limits.
Industry analysts speculate that the recent hot stock market trends have driven an increased desire amongst investors to redeem cash management products for stock speculation, potentially causing temporary redemption pressures for cash management products.
With the continuous rise in stock trading volume, some investors are considering leveraging (including borrowing).
The aforementioned bank revealed that during the “National Day” holiday, one branch’s consumer loan product disbursed over 700 million yuan, surpassing the loan volume during the year’s “peak loan issuance” period, showing a stark contrast with the lackluster withdrawal requests before the market surge.
A customer manager from the bank stated, “During the ‘National Day’ holiday, a customer immediately applied for a consumer loan after opening an account, specifically inquiring if the loan could be disbursed by the 8th.”
According to the “Financial Times” on October 8th, financial regulators have instructed financial institutions to strictly control leveraging and prohibit bank credit funds from illicitly entering the stock market. However, the swift approval and disbursement of consumer loans have posed challenges for post-loan management.
The bank official bluntly stated that after disbursement of consumer loans, if clients directly conduct bank-securities transfers, the bank can monitor it immediately and can draw funds in advance. However, clients with investment intentions often bypass this monitoring by withdrawing cash, making transfers, and ultimately routing funds to securities accounts.
According to the “First Financial” report on October 9th, many banks are still running promotional activities for consumer loans, such as group loans and free interest coupons, with the lowest preferential rate reaching 1.8%. This has led many investors to eagerly consider borrowing for market entry, providing opportunities for loan intermediaries to illicitly recommend consumer loan funds into the stock market.
On October 9th, the A-share market experienced a significant plunge, catching many investors who had entered the market on the 8th off guard. Some investors viewed the market’s minor fluctuations as opportunities to increase their holdings amidst the bullish trend. A investor from Hangzhou told the media that he had invested all the funds borrowed from the bank into the stock market, despite still being in a loss position, he slightly increased his holdings on the same day.
Industry insiders point out that there is still a risk of market correction in the future. Injecting low-cost consumer loan funds into the stock market essentially involves leveraging. Any market turbulence could amplify losses. Furthermore, this behavior could spread risk to financial institutions, leading to an increase in non-performing loans.
On social media, many new investors who entered the market in the past two days complained about being hit by a market downturn. An investor from Jiangsu expressed frustration that after buying several stocks on the 9th morning, expecting a buying opportunity, the afternoon saw a more severe plunge. Uncertain about the future trend, he had applied for loans from multiple banks during the holiday with interest rates ranging from 2.5% to 3%, all invested on the 9th and experienced immediate losses.