AS China’s legions of retail investors flee the country’s tumultuous equity markets, pushing stock prices down sharply this year, money is flowing into perceived safe-haven assets such as domestic bonds, gold and the U.S. dollar.

    Unlike Western markets where institutional investors dominate, individuals account for 80 percent of transactions on Chinese exchanges. Nearly 100 million people have trading accounts.

    Their enthusiasm for stocks drove China’s main indices to record highs in the first half of 2015, but after enduring a summer bust that saw prices plunge around 40 percent, the January selloff has been the final straw for many.

    “I just have a small amount of money in the stock market. I had planned to sell when indices got a little bit higher, but soon it dropped to this situation,” said Zhou Junan, a 22-year-old retail investor in Guangdong. “I don’t have faith in the stock market any more. I think it’s better to buy dollars.”

    Weekly data from the Shanghai Stock Exchange show money shifting into exchange traded funds (ETFs) tracking bonds, gold and money markets at the start of January.

    Funds that provide a vehicle for Chinese individuals to invest in overseas stocks and bonds through the Qualified Domestic Institutional Investor (QDII) program were also popular, continuing a trend that began late last year.

    On Thursday, the Securities Times newspaper reported that 10 mutual funds under QDII had suspended or restricted taking subscriptions after strong demand led to quota shortages. The measures followed a nearly 10 percent jump in assets of such funds in December alone.

    Alongside the renewed slide in stocks, ordinary Chinese investors have been shaken by the recent acceleration in the decline of the yuan, which has fallen nearly 5 percent since August.

    “The stock market is in a mess,” said a 48-year-old woman from Kunshan, a city near Shanghai, working in the accounting department of a bank, who said she had bought 500,000 yuan (US$76,000) worth of U.S. currency. “Dollar is far less risky.”

    That has also fuelled demand for gold.

    “Except for gold, all other assets are just bubbles to me,” said a 24-year-old female investor in Beijing. “I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal.”

    In just seven trading days at the start of this year, assets under management at HuaAn Gold ETF, China’s biggest gold ETF, rose 8 percent, after doubling during the previous six months.

    “We notice a rise in gold investment whenever there’s concern over yuan depreciation,” said Richard Xu, the fund’s manager. “Buying gold also helps investors avoid risks in equities. It serves double purposes.”

    A number of retail investors were also switching money out of stocks and into wealth management products (WMPs) and principal-protected funds.

    “I have bought different kinds of WMPs from banks. The majority of them are backed by bonds, which are less risky,” said a 50-year-old woman surnamed Wang, from Guangzhou, who said she lost 30 percent of her stock market investment in the summer meltdown before selling out in August.

    Capturing such a trend, latest data from the Asset Management Association of China showed that both bond and money market funds nearly doubled in size as of end-December from end-June, while equity funds tumbled almost 90 percent in assets under management during the same period.

    Some retail investors said they were giving up on making a return on their savings altogether, focusing instead on Chinese New Year celebrations next month. (SD-Agencies)