As foreign investors continued to leave the country amid ongoing economic worries, Chinese equities resumed their dismal trend on Thursday, putting a key measure on track for its lowest closing since November. – China stocks
As much as 1.5% was lost by the MSCI China Index, continuing what is expected to be a third straight week of losses. A measure of significant Chinese companies listed in Hong Kong and the Hang Seng Index both decreased by more than 1%. In both domestic and international currency markets, the yuan lost as much as 0.2% of its value. – China stocks
Another sign that Beijing’s efforts to rebuild market confidence are failing with investors is the selloff. In addition to a number of initiatives taken by officials in recent weeks, including a drop in transaction costs for stock trading and some limitations on stake sales by top shareholders, China’s central bank only on Wednesday pledged to utilize a variety of mechanisms to maintain liquidity that is sufficiently ample.
According to Morgan Stanley data, hedge funds have increased their pessimistic wagers on Chinese and Hong Kong companies, with short interest growing this month almost across the board. Following the Federal Reserve’s announcement that interest rates will remain higher for longer, Thursday’s falls coincided with a general decline in risk appetite across all equities markets worldwide.
“There are still uncertainties,” said Wu Xianfeng, a fund manager at Shenzhen Longteng Assets Management Co. “These uncertainties could keep sentiment low, including the prospect of a persistently hawkish Fed and the potential for a hard landing in the fallout from the property sector.” If the government launches a fresh round of purchases using a market stability fund, we might be able to see a turnaround.
Net foreign withdrawals from onshore Chinese stocks are continuing unabated as concerns about the economy and real estate market remain predominant. Following a record 90 billion yuan selloff in August, international funds have sold 24 billion yuan ($3.2 billion) this month via trading ties with Hong Kong.
At lunchtime, the benchmark for mainland shares, the CSI 300 Index, was down 0.6%. After falling 22% in 2022, the gauge has decreased by over 5% this year. On Wednesday, business activity in Shanghai and Shenzhen fell to its lowest level since October.
This demonstrates that despite the government’s nearly two-month-old pledge to “invigorate capital markets and boost investor confidence,” traders are not acting on it.
This year, China’s major corporations aim to issue record dividends totaling 1.5 trillion yuan to bolster sentiment that has been harmed by a flight of foreign investors. Hong Kong-listed companies are increasing share repurchases in the offshore market in an effort to boost values.
Even though the central bank on Thursday put the daily reference rate for the currency at the largest deviation from market expectations, the offshore yuan, which is less affected by Chinese government intervention, declined for the fourth straight day.
According to Stanley Chan, head of FX trading at Chong Hing Bank, Thursday’s yuan fixing at the greatest bias ever demonstrated PBOC’s persistent attempts to limit the currency’s decline, particularly ahead of the Asian Games. “Economic fundamentals have not changed, and the market continues to anticipate a future reduction in the RRR.”
