China retail savings and investments market set for worst year since 2008 financial crash, says GlobalData

China’s retail savings and investments market is set for the worst year since 2008 financial crash due to the domestic disruption and impact on trade partners as the coronavirus (Covid-19) pandemic has gone global, according to GlobalData, a leading data and analytics company.

GlobalData’s latest report, ‘Covid-19 Sector Impact: Retail Savings & Investments – China’forecasts the market growth to slow to 3.3% in 2020, compared to the 4.7% estimated in January. The company’s previous forecasts considered the domestic impact on China, which was already in the midst of the crisis, but not the global impact.

Ravi Sharma, Senior Banking and Payments Analyst at GlobalData, says: “Growth in deposits will be modest in 2020, with little government support; households would have to dip into savings. Bond growth will surge as investors seek the stable return of fixed income products. Equities however, will decline in 2020 by 20%. This is due to Chinese stock markets tumbling once Covid-19 became a pandemic in March. Furthermore, due to the prevalence of equity funds in China, mutual funds are expected to largely mirror the decline in equities forecasts.” 

The forecasts do not account for the possible risk of a second wave of the virus later in the year, when restrictions are fully lifted. This remains the largest threat to the market.

Sharma continues: “As the first country to enter and exit full lockdown, China’s 2020 growth is most at risk from a second-wave outbreak, which weighs heavily on the expected full-year growth.”

The impact is expected to be significant on China’s HNW sector, as individuals will struggle to accumulate wealth in the immediate future.

Sharma concludes: “The disruption to global demand will weigh heavily on the wealth market in China, even as it gets back to work. Wealth managers should be aware that many of their affluent and HNW clients will have their hands full dealing with the negative impact of the crisis on their businesses, in addition to any losses to their investment portfolio.

“One sector which should hold up is tech, which is the most vibrant wealth generator for China. GlobalData forecasts this sector to grow in 2020 and increase its share of the Chinese HNW market in the process.”

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