So it happened again yesterday – China’s stock market called off trading for the second time this week in Beijing, making it the shortest trading day in 25 years at only 29 minutes, which might have started a chaotic turn of events in international markets.
According to Canadian media organisation News1130, Chinese investors are now most likely to invest in overseas property markets like Vancouver as the yuan continues to depreciate even more.
Aside from Canada, Australia, the United States and the United Kingdom are all expected to experience an influx of Chinese investors to their property markets as they seek a safe haven for their wealth away from the tumultuous stock markets of the Mainland.
Back in July 2015, when shares in the Shanghai market dropped in value by 20 percent within a month, according to Reuters, many investors had decided to cash out. In fact, some CNY360 billion (USD58 billion) of stock was sold in January-May 2015 alone – a huge leap up from the CNY190 billion (USD 30.5 billion) that was sold during the whole of 2014. And then Black Monday happened a few weeks later.
“There is anecdotal evidence that Chinese buyers have intensified their interest in ‘safe haven’ global property markets, including London, as a result of the recent stock market volatility,” said Tom Bill, head of London residential research at Knight Frank.
London is not the only market gaining from China’s outbound investors. “There’s a huge amount of cash sitting in China and I think you’ll find a lot of that comes to the Australian property market,” said Michael Pallier, principal of Sydney Sotheby’s International Realty. The past month has already seen Sydney faced with a huge influx of Mainland investment, reports Sputnik News.
Inevitably, the US property market is incredibly attractive to Chinese investors and has been for a significant period now – the Chinese are by far the biggest foreign buyers of US property as evidenced by the USD28.6 billion worth of real estate they bought in the past year alone, according to CNBC. Generally these investments have been made into commercial developments but the recent turmoil in the Mainland’s stock markets mean that more money could also be pumped into residential markets.
“Now with the (Chinese) market crashing the way it is, you’re seeing a bigger trend and a bigger opportunity for people to look to the US to: 1) have a safe place for them to go from a political standpoint; 2) have a safe place to put their money; and 3) have an opportunity for investment,” Miami-based Alan Lips, partner with Gerson Preston Robinson, an accounting firm that works with developers to structure foreign investments, told CNBC.
Wealthy Chinese investors have never been shy of diversifying their assets and relocating elsewhere – the country has the highest outflow of high net-worth individuals since 2000 globally, according to a recent Reuters report. Some 91,000 citizens sought second citizenship elsewhere between 2000 and 2014, most notably in the “safe havens” of the US, the UK, Hong Kong, and Singapore.
Back on Mainland China, the government is anticipated to implement further interest rate reductions in the real estate industry in order to help boost the economy, per the New York Times.
The stock market situation has also appeared calmer today, according to the Telegraph, as China strengthened its currency to help in appeasing investors and stabilising the market. However, it looks like it will take time for the market to really recover.
“They’ve confused enough people this week,” Ashley Perrott, head of pan-Asia fixed income at UBS Global Asset Management in Singapore, told the Wall Street Journal. “Sentiment is incredibly fragile.”