More declines ahead for China’s stock market, according to money managers at HSBC, UBS and Citic
- Slowdown in economy and earnings as well as turmoil in global markets to hold back stocks, say HSBC Jintrust Fund Management and UBS
- Rebound falters on Wednesday, with equities trimming gains
Policymakers in mainland China will need to do more to convince top money managers and strategists that a world-beating slump in the country’s stock market is over.
The benchmark Shanghai Composite Index has rebounded by 4.7 per cent after falling to a four-year low last week, but HSBC Jintrust Fund Management forecast that Chinese stocks will witness consolidation in the best case scenario, and that an immediate turnaround in declines was unlikely.
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“The revival of market confidence isn’t going to happen overnight and the market may still carry risks in the short term,” said Shi Xingtao, a fund manager at Shanghai-based HSBC Jintrust Fund Management. “China’s economy is still in a downward cycle and the Chinese market can’t be shielded from the global turbulence that has just started.”
Shi’s fund has trounced 96 per cent of its rivals over the past three years, according to Bloomberg data, and he said he would wade through beaten down small caps as part of his stock picking strategy, without naming any specific stocks.
The asset management unit of HSBC Holdings and the investment banking arm of Bank of Communications have also said Chinese equities were still exposed to turmoil in global markets; Citic Securities, China’s biggest listed brokerage, and UBS Group have said slowing growth in earnings and the economy will continue to drag down stocks.
Hit by the US-China trade war, Beijing’s financial deleveraging campaign and the recent risks associated with shares used as collateral for loans by small companies, China’s stock market has dropped to levels last reported following a crash in 2015 that wiped US$5 trillion in market values. This year, it also entered bear market territory, and was replaced by Japan as the world’s second-largest stock market.
