The number of small investors holding stocks in their accounts slid to 51 million at the end of July from 75 million in June, said the China Securities Depository & Clearing Corp, which is the agency that tracks accounts. The Shanghai Composite Index plunged 14 per cent, a record single month drop in six years.
Unlike institutional investors dominate the US stock market, small and individual investors are major players in the Chinese stock market, state-run China Daily reported.
According to data from China International Capital Corp, small investors hold about 80 per cent of outstanding shares of public companies.
China has pressed in police to investigate the massive stock market crash wiping about $3.2 trillion of capital.
Official media put the losses around $1.1 trillion.
Since the start of market plunge after it hit peak in mid-June, the government rolled out a series of easing policies, but the results have had limited impact.
Despite stocks becoming cheaper due to the market plunge, fewer people are entering the market. Compared to June, 20 per cent fewer new accounts were created in July, the report said.
Bank deposit is still a favourite investment tool for Chinese families. Up to 50 per cent of disposable income will end up in families' saving account, according to data from World Bank.
Due to recent volatility, it is unlikely that many families will move their money from saving account to stock market.
China's recent stock market crash in June 12, wiped out about three trillion dollars of capital. The fall sent a warning to China's economy that has already faced downward pressure such as sluggish external demand and weak investments.
The stock market had lost around 29 per cent of value since its peak of 5,178.19 points.
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