Chinese stocks near end of capitulation find few takers as foreigners dump, confidence ebbs

Name: What China could gain, and lose, in the Ukraine-Russia crisis
Uploaded: 2022-03-27T23:30:28.000Z
Duration: 7 min 14 s
Description: What China could gain, and lose, in the Ukraine-Russia crisis

By some yardsticks, Chinese stocks are oversold and may be approaching the end of capitulation after a US2.4 trillion sell-off this year

But weak sentiment will continue to dog the market as headwinds such as the threat of US sanctions and slower corporate earnings remain, according to China Renaissance

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The Hang Seng Index’s 66 members are trading at a record 13 per cent discount to book value, according to Bloomberg data. Photo: AP

Zhang Shidong

Published: 7:30am, 28 Mar 2022Updated: 10:59am, 28 Mar 2022

Going by some yardsticks, Chinese stocks are oversold and may be approaching the end of capitulation after a US2.4 trillion sell-off in Hong Kong and mainland bourses this year.

MSCI China, the broadest measure of local markets, is trading at the lowest price-earnings multiple since mid-2013 excluding banks, according to Goldman Sachs. The Hang Seng Index’s 66 members are trading at a record 13 per cent discount to book value, according to Bloomberg data.

Crucially, top Beijing officials have stepped in to calm nerves, while stock buybacks of late, from the likes of Alibaba Group Holding and Xiaomi, have gained momentum in attempts to put a floor under stock prices.

Yet, confidence remains in short supply. The threats of US sanctions and delisting from American exchanges, as well as slower corporate earnings, have become bothersome. Foreign investors have hastened their retreat, with US$10 billion net-selling of onshore stocks this year.

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What China could gain, and lose, in the Ukraine-Russia crisis

“Sentiment is still the major driver of market performance,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities. “Valuations do not seem to matter as much now. It may be too early to say where the floor level or bottom of the market is, or even difficult to confirm any signal of bottoming.”