One of the few profitable China stock trades this year is in danger due to the geopolitical conflict and the deteriorating economic outlook. The benchmark CSI 300 Index’s sixth consecutive week of losses is its longest skid since August.
Unfavorable inflation, credit growth statistics, and new indications of decoupling from the West revived doubt about the overall market and hindered one of the main haven trades this quarter. The post-Covid zero reopening policies’ initial growth boom has faded, according to Kelvin Wong, senior market analyst for Asia Pacific at OANDA, and increased geopolitical risk may turn away international investors.
Geopolitical and Growth Risks
Due to Italy’s intention to withdraw from Beijing’s Belt and Road Initiative, China‘s diplomatic dispute with Canada, and the US’s pressure on the Group of Seven countries to reduce tech exports to China, foreign investors turned net sellers of mainland stocks in April.
The SOE industry has grown in popularity this year due to government reforms intended to increase efficiency and improve funding access. China has a vast number of state-owned businesses, with 98 of them being directly under the supervision of the national government.
- The benchmark CSI 300 Index’s sixth consecutive week of losses is its longest skid since August.
- China has a vast number of state-owned businesses, with 98 of them being directly under the supervision of the national government.
- On Monday, one of the top gainers, Bank of China Ltd., lost most of its 10% gain by Friday.
Massive volumes and options trading was seen during this week’s share rally, although the gains waned on Tuesday in the afternoon. On Monday, one of the top gainers, Bank of China Ltd., lost most of its 10% gain by Friday.
Recent economic figures have raised doubts about the state of China’s economy because consumer prices have scarcely increased and production prices continue to be severely deflationary.
Manufacturing activity decreased and imports declined sharply as credit expansion fell far short of expectations. The consulting business is in upheaval as a result of Xi’s crackdown on alleged dangers to national security, and the government’s efforts to entice foreign investment are in jeopardy.
Because they believe that the recent volatility is merely a blip on an upward trend, investors are hanging onto their investments in SOE. Strategists at Goldman Sachs Group Inc. predict that if the reform impetus results in greater growth, the total market value of SOEs might increase by 20%.