China's post-Covid economic issues are worsening as stocks hit a five-year low today.
The onshore equity benchmark has been pushed to its lowest in nearly five years, testing the resolve of investors who were hoping for a revival in Chinese stocks.
The slump follows ongoing concerns over the nation’s economic recovery and policy uncertainty.
Bloomberg reports foreign investors were back selling in earnest today, offloading the equivalent of $600million of mainland shares.
China's economic crisis gets WORSE as stocks hit five-year low
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It wasn't the end of the economic woes for China this week.
The bankruptcy of shadow bank Zhongzhi Enterprise Group combined with rising trade tensions with Europe added to the ongoing financial risks.
A report released today showing that the securities regulator has lifted a ban on net selling for local mutual funds also hurt sentiment.
Head of APAC equity derivatives strategy at BNP Paribas Jason Lui said: "[There hasn’t been] any major new policy announcement coming out of the broader China complex...we don’t necessarily have the same kind of growth trajectory to just reattract flows right away."
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Shadow bank Zhongzhi Enterprise Group went bankrupt earlier this week
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Bloomberg reports the CSI 300 benchmark fell 1.3 per cent today to close at its lowest since February 2019.
The gauge has declined in every session this year to shed over 4 per cent becoming one of the world’s worst-performing major equity indexes.
The Hang Seng China Enterprises Index slid more than 2 per cent to close at the lowest since November 2022, with tech stocks leading the losses.
In 2023, the CSI 300 Index ended the year with an unprecedented third straight annual loss after foreign purchases via trading links with Hong Kong shrank to the smallest on record.
However, proponents of Chinese stocks say valuations have become too cheap to ignore, and cite the potential for huge gains should positive triggers kick in.
China equity strategist at UBS Securities Meng Lei said: "The worst is over... [we are] relatively optimistic about China stocks in 2024."
However, economic forecasters warned upcoming data is unlikely to change the weak narrative on China.
According to estimates compiled by Bloomberg, consumer prices likely remained in deflation in December while credit expansion slowed from the previous month.
