SINGAPORE: After a rocky run for the Chinese economy, Newsweek reports that authorities in China are practically begging institutional investors to hang on to their stocks, hoping to stop the bleeding as foreigners make a run for it.
On Monday, Chinese stocks got sucker-punched when the central bank kept its policy rate at 2.5%, not giving in to the popular demand for an interest rate cut. The CSI 300, China’s stock indicator, hit rock bottom, the lowest since 2019 – worse than the dip in Oct 2023.
As of today, the index managed to crawl up by 0.006% from Monday. But don’t break out the party hats just yet; it’s still down 25.64% from this time last year.
Meanwhile, global markets, like the S&P 500, are popping champagne with a 24% surge in 2023, hitting an all-time high.
While China’s stock ship is sinking, other boats are rising. The MSCI World index, which covers 23 Developed Markets countries, has been on the up since the second quarter of 2023.
However, the FTSE China 50 index, featuring 50 big-shot Chinese stocks, took a 1.77% dive between Monday and Tuesday and is down a whopping 29.24% from a year ago.
China’s regulators are throwing lifeboats by restricting certain investors and trying to stop them from selling stocks on certain days. They’re saying, “Hold on, we can fix this!” The strategy was called “window guidance.”
The CSI 300 rebounded by 3% at the end of 2023, only to plunge more than 4% in the first week of 2024.
Regulators are tightening the screws again, this time on securities companies. China’s central bank, the People’s Bank of China (PBOC), is in a bit of a pickle. The Chinese yuan is losing muscle, weakened more than 1% against the US dollar this 2024.
Meanwhile, China’s leadership are playing it cool, not making any big moves to buy up stocks and boost the economy. This chill attitude has foreign investors spooked, with a whopping 90% of the money that flew into China’s stock market from abroad in 2023 saying their goodbyes by the year’s end, according to the Financial Times.
Singapore is feeling the ripples!
China’s stock slump is dragging Asian equities down, and Singapore’s investors are watching nervously, Nasdaq reports. Singapore’s investment strategists are also watching nervously.
Jun Rong Yeap, a market strategist at IG in Singapore, said, “The series of China’s economic data releases today seem to reflect more of the same – an uneven growth environment, which does not offer much conviction of a sustained turnaround just yet.
The trend of weak economic data suggests that the accommodative policy environment has yet to translate to a sustained turnaround in economic conditions, which may amplify the call for more supportive intervention by authorities in the first half of 2024.”
Vasu Menon, the managing director of investment strategy at OCBC Bank in Singapore, stated, “The biggest short-term risk to the market is the disconnect between what the market is expecting and what might happen.
The reality is that the markets are coming to terms with the fact that may be they have gone into overdrive in terms of rate cuts (pricing).”
With all the geopolitical drama and the U.S. Federal Reserve hitting the brakes on interest rates, the world’s financial scene is a bit of a mess. Asia, including Singapore, is hanging out in China’s economic shadow, showing some tough days ahead.
Keep those seatbelts fastened, folks; it’s gonna be a bumpy ride. /TISG