The stock markets in China and Hong Kong have witnessed a sharp decline this week, hitting multi-year lows. The loss of confidence in the world’s second-biggest economy and the outflow of foreign money are the primary reasons behind the plummeting markets.
The real estate sector is also facing a significant downturn, with sputtering growth becoming more evident. In response to the selloff, investors and market strategists have shared their views. Derrick Irwin from Allspring has stated that investors hoping for the Chinese government to rescue the economy may need to re-evaluate their expectations. He further added that until a more significant crisis emerges, the Chinese government may only take small measures to contain the situation.
Marko Papic, the Chief Strategist at Clocktower Group, has argued that policymakers have renewed their focus on financial sector regulation and anti-corruption campaigns following the financial work conference. He believes this could lead to heavy-handed regulatory measures in the financial sector, making it difficult for Chinese investors.
Pierre Hoebechts, the Head of Macro Research at East Eagle Asset Management, has explained that the government’s approach to managing the economy for the long term has resulted in investors losing interest. Tony Roth, the Chief Investment Officer at Wilmington Trust Investment Advisors, has stated that they are looking to allocate their investments elsewhere, with a focus on emerging markets other than China. Norman Villamin, the Group Chief Strategist at UBP, has emphasized the need for selective buying, given the restructuring of China’s property sector.
Jon Withaar, the Asia Special Situations Fund Manager at Pictet Asset Management, has talked about retail structured products termed ‘snowballs’ that are reaching their ‘knock-in’ levels in China. Redmond Wong, the Chief China Strategist at Saxo Markets, has highlighted the diversity of the investor base in Hong Kong stocks, including institutional investors with a global or Asian benchmark. Wong Kok Hoong, the Head of Equity Sales Trading at Maybank, has predicted that the Hang Seng will test 14,600, the last 2022 low.
Finally, Matt Simpson, the Senior Market Analyst at City Index, has noted that the recent rescue package has not impressed traders, as it does not address the fundamental issue. Diana Rulke, a Professor at Tepper School of Business, Carnegie Mellon University, has highlighted the contrast between the consumer spending patterns in the US and the real estate market in China, which has started to collapse instead of recovering after COVID restrictions.