China’s domestic investors warn of bigger sell-off unless stimulus rolled as post-Politburo meet euphoria fades
- China’s Politburo meeting in July triggered hopes stock market incentives could be launched to stimulate trading volumes
- Hopes have faded for a cut in stamp duty on stocks and reintroduction of a trading mechanism that would allow buying and selling of stocks on the same day
Euphoria over a pledge by China’s top policymakers to boost its capital markets and lift investor confidence has begun to fade as traders fret over the lack of any meaningful measures and warn of a bigger sell-off unless talk translates into action.
Clearly this was not enough to placate investors. A gauge of the mainland-traded brokerages, deemed as a key beneficiary of capital-market reforms, is displaying signs of positions being unwound. An index compiled by data provider Shanghai DZH, which tracks 54 listed brokerages including the industry’s biggest players like Citic Securities and China International Capital, has fallen 2 per cent from an August peak.
“Such gestures from the regulators to talk up the market used to work [in the past], as it was a relatively small market,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “Now that the size of the stock market is about 80 per cent of China’s economy, such verbal actions will no longer have a material impact now. We need to see something concrete and substantial.”
China has the world’s second-largest stock market, with its combined value jumping 25 fold over the past two decades to US$9.9 trillion. But the benchmark stock gauge has remained little changed this year, trailing other major markets in Asia such as Japan and South Korea, as growth lost momentum in the post-Covid era and as the government’s stimulus measures fell short of expectations.
