After almost a decade of continuous growth, recent years have been tough on both the Chinese economy and its stock market. In fact, recent reports indicate that its stocks have lost more than $6 trillion since 2021, and – judging by the first month of 2024 – this is set to bring further pain to investors.
In fact, the opening of 2024 demonstrated a lack of investor confidence in the Asian juggernaut’s economy, and recent weeks – despite the government’s efforts to stabilize the situation – saw a mass selloff that wiped more than $1 trillion from the Chinese stock market in 13 days.
Additionally, China’s real estate market is also in the midst of a major downturn with a deepening crisis that saw the country’s largest property developer – Evergrande Group (3333. HK) – go bankrupt, prompting many to fear that the entire sector is poised to take an even greater plunge.
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China’s staggered reaction
A contributing factor to the current crisis has come in the form of indecision on the part of the Chinese government. So far, it has implemented multiple measures to stabilize the situation with little success.
On January 23, for example, news that the Asian country’s government is preparing a rescue package that would pull from offshore assets and inject nearly $300 billion into the economy. Previously, China’s Central Bank lowered the requirements for cash reserves, which other banks had to hold, hoping it would provide an additional $140 billion.
While the measures had an impact on the overall stock market and saw major companies’ shares, such as Alibaba’s (NYSE: BABA, HKG: 9988) surge, the improvement proved temporary, and the major indices have, by February 5, reverted to their pre-January 23 prices.
In fact, the situation turned sour enough that the Hong Kong stock market shrunk to the size it was when the U.K. handed over the city’s governance in 1997.
In early February, the government of China again stepped up its efforts, promising a series of measures such as cracking down on malicious short-selling and insider trading to a mixed initial reaction.
China’s stock market volatility
On Monday, February 5, the CSI 1,000 index – commonly used as a benchmark – fell 6.16%, the HSI – the main Hong Kong index – declined 0.15%, and CSI 300 – a major benchmark for mainland blue-chip stocks – rose a modest 0.65%.
Perhaps the most illustrative of the current attitude of Chinese investors is the fact that many of them flocked to the Weibo account of the American embassy to voice their dissatisfaction with the state of the country with a series of sardonic comments.
As China falters, investors flock to India
Simultaneous with the downturn in China, investors appear to have set their sights on India’s stock market, as evidenced by the significant rise in the benchmark NIFTY 50 index, which is, in the last 52 weeks, up 22.56%.
Indeed, India’s national repository data shows that the country saw $20 billion in foreign inflows throughout 2023. The rise coincides with a broad trend of international corporations moving their manufacturing plants out of China and primarily into the subcontinent.
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