Chinese stocks are bucking the global trend and experiencing a decline in November, indicating lingering concerns among investors about the country’s economic recovery. The CSI 300 index, which represents mainland Chinese stocks, has seen a drop of more than 2% this month, marking the weakest performance among the world’s major stock markets. This slowdown is heading into its fourth consecutive month, with the index hovering around the 2023 low recorded in October.
The stark contrast between the Chinese market’s woes and the global rebound, as reflected in the nearly 9% rise of the MSCI All-Country World Index this month, is raising concerns. The global rally has been largely fueled by speculation that the Federal Reserve has wrapped up its interest rate hikes.
Commenting on the prevailing sentiment, Willer Chen, senior analyst at Forsyth Barr Asia Ltd, said: “Sentiment has been very bad. If you look at this month’s macroeconomic numbers, the only improvement is probably coming from retail sales and industrial production. On the policy front, there has been a lot of noise this month, but nothing concrete or confirmed.”
Recent economic indicators are adding to concerns, with data revealing a contraction in China’s manufacturing activity in November and a contraction in the services sector for the first time this year. Despite Beijing’s efforts to stabilize the troubled real estate sector, as seen when regulators compiled a list of 50 developers eligible for financing, overall market sentiment remains weak.
The real estate sector continues to pose a threat to growth, as the decline in home sales and property investment affects demand in various industries. Even positive developments in Sino-US relations during the recent meeting between Chinese President Xi Jinping and US President Joe Biden failed to lift investor confidence. Additionally, major technology companies such as Meituan reported disappointing results, contributing to a decline in market sentiment.
Redmond Wong, a strategist at Saxo in Hong Kong, commented: “Investors have been disappointed by China’s economic recovery, while third-quarter earnings and corporate guidance failed to impress.”
With the CSI 300 down 10% for the year, it is on track for an unprecedented third consecutive annual loss. Global funds are expected to continue reducing their holdings of continental stocks for the fourth consecutive month. However, some global fund managers see potential in current market conditions. Fidelity International intends to cautiously increase exposure to China, while Invesco Ltd. recognizes the difficulty of maintaining an underweight position in China given attractive valuations resulting from the current sell-off.
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