Macroscope | China stock market bulls aren’t just being contrarian

Name: Boom, bust and borrow: Has China’s housing market tanked?
Uploaded: 2023-12-18T09:00:17.000Z
Duration: 10 min 57 s
Description: Boom, bust and borrow: Has China’s housing market tanked?

Despite concerns about China’s economy and markets, some prominent strategists and fund managers are optimistic about the prospects for Chinese stocks

There is a sense that the economy has stabilised amid the property sector’s struggles, Chinese shares are affordable and parts of the market have proven resilient

Reading Time:4 minutes

Why you can trust SCMP

A woman rides a scooter beneath a large screen showing stock exchange and economy data in Shanghai on October 20, when Asian shares hit an 11-month low. Photo: EPA-EFE

Nicholas Spiro

Published: 5:00pm, 18 Dec 2023

Another month, another batch of bleak data for China’s crisis-ridden residential property sector. Average prices for second-hand homes fell 0.8 per cent in November, the sharpest monthly decline since October 2014, while average prices for new homes in 70 cities dropped for the sixth straight month.

Investment in real estate development has fallen 9.4 per cent this year, while home sales have contracted for 18 of the last 22 months. In a report published on December 15, Nomura said that “while markets may have become somewhat desensitised [to] constant discussions related to the property sector, it remains the single largest drag affecting China’s economy”.

In China’s equity market, there are no signs of complacency whatsoever. The MSCI China Index, which tracks Chinese stocks listed at home and abroad, fell a further 14 per cent this year. This is its third straight year of losses following the peak of China’s equity and property markets in 2021.

Since the end of 2020, China has been among the worst-performing stock markets in Asia in US dollar terms, dragging down the region’s emerging market equities because of its dominance of the benchmark index.

The bar for a durable rally in Chinese stocks has not been this high in nearly a decade, mainly because of the loss of confidence in the all-important property market which has accentuated deep-seated problems in the economy and fuelled uncertainty about the path to achieving sustainable growth in a post-property boom era. “It’s clear something more structural is going on in China,” said Winnie Wu, chief China equity strategist at Bank of America Securities.

10:57

Boom, bust and borrow: Has China’s housing market tanked?

Yet despite significant concerns about China’s economy and markets, some prominent strategists and fund managers are relatively optimistic about the prospects for Chinese equities next year.

.css-1m2rp1p{color:#34b8b5;}Macroscope | China stock market bulls aren’t just being contrarian

Macroscope | China stock market bulls aren’t just being contrarian