China’s stimulus lifts stock markets in short-lived rally as geopolitical, economic and policy risks weigh
- A Goldman Sachs poll of its clients this month showed 41 per cent are hesitant about buying stocks. Geopolitics, domestic politics, and deflation were the top concerns
- HSBC says investors are still concerned about deflation, consumption downgrades, weak demand, property market struggles and liquidity problems
China’s efforts to support stocks in Shanghai, Shenzhen and Hong Kong has triggered a US$689 billion gain in market valuation last week following 2023’s brutal sell-off. This recovery may not be a long-lasting one as policymakers are still faced with the challenging task of attracting money managers back to Chinese equities in a meaningful way.
A Goldman Sachs poll of its clients this month showed 59 per cent of investors viewed China’s markets as investible, which means a still-significant 41 per cent are hesitant about buying stocks. Geopolitical risks, domestic politics, and deflation were the top concerns.
“The ‘emergency response’ by China last week helped restore investor confidence,” said Qi Wang, chief investment officer of UOB Kay Hian’s wealth management division in Hong Kong. “How long the optimism will continue depends on whether the policy momentum can continue. China must show willingness to act on any signs of weakness.”
“The market slump at the start of the year took us by surprise,” Steven Sun, head of research at HSBC Qianhai Securities, said in a note to clients last week. Investors are still concerned about deflation, consumption downgrades, weak demand, property market struggles and liquidity problems, he added.
This month, HSBC’s Sun has slashed the year-end target for CSI 300 Index to 3,800 from 4,100, due to a 4 to 5 per cent earnings downgrade from the levels projected in the firm’s outlook published in November 2023.