Chinese stocks remain steady in the face of wild gyrations in global financial markets

Mainland stocks’ subdued reaction may help boost the appeal of the market that is grappling with waning confidence and economic slowdown, analysts say

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Chinese stock markets have remained relatively calm in the face of volatility that has gripped global markets in recent days. Photo: Reuters

Published: 5:00pm, 7 Aug 2024

Chinese stocks, which have withstood the epic wild swings in global financial markets, have once again emerged on investors’ and analysts’ radars as they reassess the outlook for the world’s second-largest market.

The volatility of most major markets in Asia hit multi-year highs heading into August, but the 10-day realised price swing on the CSI 300 Index reached a five-month high before quickly subsiding, according to Bloomberg data. The volatility on Japan’s Nikkei 225 surged to a level not seen since at least 2014, while rising to more than four-year highs for the MSCI Asia-Pacific Index and South Korea’s Kospi, the data showed. The VIX index, Wall Street’s fear gauge, surged by the most since 1990 this week.

Mainland stocks’ relatively subdued reaction to the global storm may help boost the appeal of the US$8.4 trillion yuan-traded market that is grappling with waning confidence among investors and an economic slowdown, according to analysts. Smart money may have already flowed into Chinese stocks, with a Goldman Sachs report showing global hedge funds added to their exposures last month, albeit slightly.

“Chinese equity markets will likely relatively outperform,” said Gary Dugan, CEO of The Global CIO Office in Dubai, which provides services to family offices, wealth managers and ultra-high-net-worth individuals. “We suspect the leadership will be even more focused on supporting domestic demand now that the US economy appears at risk of slowing more sharply than previously anticipated.”

A Politburo meeting chaired by Communist Party boss Xi Jinping last week dispelled some gloom in the market by signalling more measures to stimulate short-term growth and support household consumption. That to some extent countered the fallout from the global tumult sparked by jitters about a US recession and an unexpected monetary policy tightening by Japan’s central bank.

The daily movement on the CSI 300 has remained below 2 per cent every day this month, unlike massive gyrations in other Asian markets, according to Bloomberg data. The Nikkei tumbled by a record 12 per cent on Monday before rebounding 10 per cent the next day. The Kospi recorded a swing of about 12 per cent on the first two days of this week, with the decline reaching almost 9 per cent on Monday.