Chinese stocks set for record third year of losses as post-Covid recovery sputters, foreign funds flee
- The CSI 300 Index has dropped 14 per cent year to date, adding to a 22 per cent plunge in 2022 and a 5.2 per cent decline in 2021
- The worst for Chinese stocks is likely over and they are due for a rebound, according to global investment banks
China’s stocks are heading for an unprecedented third straight year of losses, as the world’s second-largest market reels from a slew of setbacks ranging from flopped reopening trade to faltering growth and unprecedented foreign outflows.
The CSI 300 Index has dropped 14 per cent so far this year, adding to a 22 per cent plunge in 2022 and a 5.2 per cent decline in 2021. The losing streak would be the longest on record for the gauge that tracks the biggest stocks on the Shanghai and Shenzhen exchanges.
This year has turned out to be topsy-turvy for traders, with the markets getting off to a strong start on sky-high expectations for the market after China scrapped three years of stringent Covid-19 curbs. Sentiment deteriorated after the initial excitement, as optimism about a strong post-pandemic recovery did not pan out as expected amid a continuing slump in the property market, Beijing’s underwhelming stimulus measures and aggressive interest-rate hikes in the US.
“Investors have been through a tough year in 2023, as weakening consumer spending and the downturn in the property market both exceed estimates,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “The geopolitical tensions coupled with monetary policy tightening in the US have added fuel to the sell-offs.”
Foreign investors’ selling has played a key role in exacerbating sentiment. Global fund managers are disappointed by Beijing’s growth-stabilising measures and have been pulling out to park money in high-yielding assets in the US and other Asian markets such as Japan and India.