Some of China’s top investment banks and money managers have started to call a bottom on the world’s second-largest stock market, after Beijing reassured investors by pledging more measures to bolster the economy and stocks, and the US Federal Reserve started to raise borrowing costs as anticipated.
China International Capital Corporation (CICC) said that a huge sell-off was already over and that the market had moved to the stage of building up from the bottom, while Huaxi Securities said that stocks would start to rebound from where they were currently. HSBC’s local fund management venture had also become optimistic about stocks, citing policy support and easing of headwinds that have weighed on sentiment, and HFT Investment Management said that the 25 basis-point increase in US interest rates had removed a major market hangover.
China’s stocks have been on a wild ride over the past week, with panic selling and regulatory talks jolting the market. The benchmark Shanghai Composite Index fell to a two-year low before Vice-Premier Liu He said in a financial stability meeting on Wednesday that the government would roll out more measures to bolster growth, defuse the risk in the property market and stabilise stocks. Just hours later, the China Securities Regulatory Commission (CSRC), the stock market watchdog, responded to Liu by encouraging listed companies to buy back shares and asset management firms to subscribe to their own fund units. The CSRC also said that it had moved to resolve the delisting risk of Chinese companies trading in the US, a key concern that had spurred recent selling by foreign investors.
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“That’s a set of policies that is helpful to repair the over-pessimistic sentiment among investors,” said Li Lifeng, a strategist at Huaxi Securities in Shanghai. “Given the policy bottom is in place, the market bottom is in sight.”
Rapid declines may already be over and the market may see consolidation, with shrinking turnovers, CICC says. Photo: Bloomberg
The Shanghai Composite will bottom out at a range of 3,000 to 3,100 and start a rebound, and its sustainability will rest on the magnitude of Beijing’s stabilising measures, the pace of the Fed’s tightening and geopolitical developments, Li said.
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The index rose 1.2 per cent to 3,251.07 at the close on Friday, rebounding 6 per cent after hitting a two-year low of 3,063.97 on Tuesday. It remains 11 per cent down this year and is among the worst performing major markets in Asia, as investors are wary of a slowdown in growth, a flare-up in the pandemic that has rattled the country’s biggest cities, and potential runaway inflation amid Russia’s invasion of Ukraine.
