The Chinese markets disappointed investors who were expecting a post-pandemic boom in 2023.
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Foreign funds bought $6.2 billion of Chinese onshore stocks, according to Bloomberg records.This is the lowest-ever amount of foreign investor purchases in mainland shares.China’s economy struggles to recover post-pandemic amid a property crisis and youth unemployment.
China was supposed to be the comeback story of 2023 — but that didn’t happen.
Instead, China’s economy is still struggling to recover post-pandemic and is facing significant headwinds from a property crisis and record-high youth unemployment rates.
Confidence in Chinese markets has fallen so much this year that foreign investors are likely to have made their smallest-ever purchases of mainland-listed stocks on an annual basis, according to Bloomberg calculations based on Shanghai and Shenzhen stock exchange data.
Foreign funds have bought 44 billion Chinese yuan, or $6.2 billion of Chinese onshore stocks on a net basis via stock connect programs — the main way foreign investors trade mainland shares — with Hong Kong so far this year, per Bloomberg.
This amount of purchases is the lowest amount since 2017, when Bloomberg started compiling annual data for both exchanges. In fact, 44 billion yuan was what investors would pump into the Shanghai and Shenzhen exchanges in a month when times were good, according to Bloomberg.
But times have changed. The CSI 300 index — which tracks the performance of 300 stocks listed on the Shanghai and Shenzhen exchanges — is 12% lower this year-to-date and could end lower for a third straight year.
The outlook for China’s economy is cloudy.
“Fact is, 2024 growth is likely to decelerate to around 4.5% as persistent geo-political headwinds conspire with conflicting socio-economic objectives hampering stimulus efficacy,” wrote Vishnu Varathan, the head of Asia economics and strategy at Mizuho Bank in a Thursday note seen by Business Insider.
China hasn’t announced its official growth target for 2024, but government advisors told Reuters in November that they would be recommending targets in the 4.5% to 5.5% range.
Chinese policymakers have the option of boosting the country’s economy via stimulus, but it could also create more longer-term problems such as debt defaults, Alfredo Montufar-Helu, the head of the Conference Board’s China Center for Economics and Business told Business Insider’s Phil Rosen on Thursday.
Mizuho’s Varathan concurs, writing in his Thursday note that any stimulus efforts would “backstop but not durably boost, much less ‘lift all boats’ in Asia.”