Chinese stock rally takes a U-turn
As traders grow impatient with the Chinese government’s reluctance to introduce new stimulus measures, the market is sinking furiously in response.
Traders were disappointed by China’s economic planning agency’s press conference. While there were high hopes for new fiscal policies from the government, the presser turned out to be a nothingburger. China’s Ministry of Finance now plans another briefing on Saturday, during which it will introduce a “countercyclical adjustment of fiscal policy.”
But as The Wall Street Journal’s Lingling Wei put it, the framing indicates that China’s leadership sees the country’s economic woes as “cyclical” rather than “structural.” That disappointed analysts who expected the government to acknowledge the problem and aim to lift the economic fundamentals.
The CSI 300 Index, which tracks stocks listed in Mainland China, plunged 7.1% on Wednesday, the index’s biggest drop since 2020. In Hong Kong, the benchmark Hang Seng Index finished 1.4% lower on Wednesday, after losing a whopping 9.4% on Tuesday, its biggest loss in 14 years.
The Mainland China market closed for the first week of October for the National Day holiday, while the Hong Kong stock exchange restarted trading on October 2. This allowed the Hong Kong market to react first to global market moves and investor sentiment.
In the US, ETFs that track China stocks also suffered from loss. iShares MSCI China ETF, which tracks Chinese companies available to international investors, was down 10.8% on Tuesday. iShares China Large-Cap ETF fell 9.2%, while KraneShares CSI China Internet Fund lost 10%. Businesses that rely on Chinese consumers, including beauty retailer Estée Lauder, and luxury stocks also suffered from losses.
But as The Wall Street Journal’s Lingling Wei put it, the framing indicates that China’s leadership sees the country’s economic woes as “cyclical” rather than “structural.” That disappointed analysts who expected the government to acknowledge the problem and aim to lift the economic fundamentals.
The CSI 300 Index, which tracks stocks listed in Mainland China, plunged 7.1% on Wednesday, the index’s biggest drop since 2020. In Hong Kong, the benchmark Hang Seng Index finished 1.4% lower on Wednesday, after losing a whopping 9.4% on Tuesday, its biggest loss in 14 years.
The Mainland China market closed for the first week of October for the National Day holiday, while the Hong Kong stock exchange restarted trading on October 2. This allowed the Hong Kong market to react first to global market moves and investor sentiment.
In the US, ETFs that track China stocks also suffered from loss. iShares MSCI China ETF, which tracks Chinese companies available to international investors, was down 10.8% on Tuesday. iShares China Large-Cap ETF fell 9.2%, while KraneShares CSI China Internet Fund lost 10%. Businesses that rely on Chinese consumers, including beauty retailer Estée Lauder, and luxury stocks also suffered from losses.
