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Institutional investors become major stock market force

By Ding Qi (chinadaily.com.cn)
Updated: 2009-05-06 09:12

Institutional investors have overtaken individuals to become the major participants of China's stock markets, which is regarded as a sign of maturity for the domestic securities sector, Shanghai Securities News reported on Tuesday.

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The paper quoted statistics from China Securities Depository and Clearing Corp as saying that as of the end of last year, institutional investors have held 54.62 percent of the market value of all tradable A shares, up 5.91 percentage points from a year earlier.

This is the first time the proportion has surpassed the landmark 50 percent level, as individual investors had long been the dominant force of stock markets in the past few years.

Stock values held by individual investors accounted for an overwhelming 69.87 percent at the end of 2005. But institutions' shares caught up in recent years, thanks to the rapid development of mutual funds and increasing social security investments.

Institutional investors in China's capital markets mainly include mutual funds, social security funds, qualified foreign institutional investors (QFII), corporate annuity funds, brokerage firms, companies and organizations. They are normally believed to be rational and professional market participants, and may serve as a market stabilizer in extreme conditions.

This flourish of institutional investors is a notable shift for domestic stock markets and suggests the securities sector is stepping toward maturity, the paper quoted market analysts as saying.

Recent increases in institutional proportion were also caused by unlocked shares previously held by institutions via share placement or split-share structure reform.

In 2005, China launched the widely-concerned split-share structure reform to transform the split equity ownership into a fully floated share structure. After certain lockup periods, a large part of stocks became tradable, and most of their shareholders joined new institutional forces in the markets.