China’s power crisis spreads pain in stock market, deflates hopes for winter stimulus kick
- BNP Paribas lists more losers than winners among mainland and Hong Kong-listed stocks in its report
- China will avoid handing out big stimulus in response to demand shock while the clampdown in property and financial sectors persists
While an MSCI gauge of firms ranging from oil and coal producers to clean-energy firms has surged 14 per cent since early September, investors could face a wider fallout from factory shutdown and weaker demand for industrial metals to add to the ongoing clampdown in the property and financial sectors.
“Given that electricity shortages stem from strong demand, policymakers will be less aggressive in providing blanket stimulus over the near term,” Arthur Budaghyan, chief emerging markets strategist at BCA, said in a report. “The basis is that unleashing more stimulus to boost the industrial sector, at a time when there are already scarcities of electricity and other inputs, will intensify the shortage and aggravate the situation.”
As a result, construction and infrastructure spending will continue to disappoint, he added. The outlook, in combination with the tech sector clampdown, “heralds lower prices for Chinese investable stocks.”
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Chinese manufacturing thrown into disarray as country's electricity crisis rolls on
The power fiasco is an ill-timed distraction for policymakers, who are seen propping the financial market to calm investors roiled by the China Evergrande Group debt implosion. Some US$1 trillion of market value has been lost in a sell-off in Hong Kong since the end of May, before last week’s tech-driven rebound.
