China’s near $10 trillion stock sell-off is getting uglier by the day
Jan 20, 2024
Chinese stocks just capped another dismal week, with a gauge of mainland firms listed in Hong Kong languishing at the bottom of global equity index rankings for the year so far.
Grim milestones have kept piling up in recent days: Tokyo has overtaken Shanghai as Asia’s biggest equity market, while India’s valuation premium over China has hit a record. Locally, a meltdown in Chinese shares is wreaking havoc on the nation’s asset management industry, pushing mutual fund closures to a five-year-high.
The Hang Seng China Enterprises Index has already lost 11 per cent in 2024. Coming after a record four-year losing streak, the slump is reinforcing a structural shift that’s seeing everyone from active money managers to passive funds turn their back on the world’s second-largest stock market.
In all, some $US6.3 trillion ($9.6 trillion) has been wiped out from the market value of Chinese and Hong Kong stocks since a peak reached in 2021, underscoring the challenge that Beijing faces as it seeks to arrest a decline in investor confidence. Authorities have ruled out the use of massive stimulus to revive the flagging economy, leaving traders wondering when things will improve.
The headwinds buffeting the market are well documented: China’s real estate sector remains a trouble spot, deflationary pressures are building and a long-running feud between Beijing and Washington refuses to go away. In recent days, uncertainties about the trajectory of US interest rates and the threat of an imminent blowout of local stock derivatives have added to investor worries.
Managers of benchmark-tracking funds have sold a net $US300 million of shares traded in mainland China and Hong Kong this month, according to Morgan Stanley. That’s a reversal from the last half of 2023, when they bought $US700 million on a net basis even as stock indexes declined.
“China is a waiting game, and we continue to be waiting,” said Mark Matthews, head of Asia research at Julius Baer, which is mostly avoiding Chinese equities.
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Hang Seng hit the Oct 22 lows yesterday. Now roughly 25% away from the GFC lows..
But USA and Oz are "different ", right? Couldnt happen here. Got the M7, AI, yadda yadda......
(20min delay)