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Chinese stocks fell to their lowest level since before the Covid-19 pandemic as Beijing’s recent efforts to shore up the country’s stock market failed to stem a selloff attributed to slowing economic growth, a liquidity crunch in the real estate sector and geopolitical tensions was.
The CSI 300 index of large and liquid stocks listed in Shanghai and Shenzhen fell as much as 1.3 percent to about 3,463 on Monday, marking the stock benchmark’s lowest level since 2019. The index is this year fallen by around 15 percent so far. expressed in dollars.
Chinese stocks outperformed global markets at the start of the pandemic and rallied earlier this year on hopes of a recovery from disruptive zero-Covid policies.
However, a subsequent slowdown in growth and high-profile defaults by Chinese developers on dollar debt have seen investors sell off Chinese stocks, while a series of support measures have been introduced by senior officials since July to “reinvigorate capital markets and conduct land policy to to encourage investors.” “Trust,” according to the Politburo, did not manage to stop the sell-off.
Global funds have also been rattled by deteriorating U.S.-China relations, as asset managers come under pressure from Washington over investments in some Chinese companies listed in Shanghai and Shenzhen.
“Global investors need two floors before they get back into China – they need a floor on geopolitics and a floor on the Chinese economy,” said an Asia-based senior capital markets banker at a Wall Street investment bank. “Only then can they start raising prices.”
Offshore investors using Hong Kong’s Stock Connect program to trade Chinese stocks onshore have sold a net worth of RMB 169 billion ($23 billion) since the start of August, bringing net inflows for the year up more than 70 percent below their peak of just RMB 66 billion.
Downward pressure on prices continues despite Chinese authorities introducing support measures in recent weeks, some of which have not been implemented since the global financial crisis.
Earlier this month, sovereign wealth fund Central Huijin invested more than Rmb477 million in four state-owned banks and pledged to buy more shares in the next six months – the first such buying program in eight years to boost the broader market.
Since last week, dozens of listed mainland companies, mostly state-owned companies such as China Petroleum & Chemical Corp and China Railway Construction Corp, have announced share buyback plans, adding to the Rmb61.2 billion pool of share buybacks carried out so far this year the stock markets on the mainland, according to figures from data provider Wind.
“Share buybacks are more about that [market] sentiment,” said Si Fu, a China equity strategist at Goldman Sachs, who said the impact of such moves on share prices alone would likely be limited.
However, she added that the smaller positions in Chinese equities currently held by both long-term investors and hedge funds would likely limit the extent of further outflows and that “we believe that monetary easing and momentum in the markets will continue to grow.” will support the development of the market in the next three months.