.Despite Beijing’s promises to boost the economy, the recent outflows from overseas traders suggest little hope for relief. The continued slowdown of the Chinese economy, coupled with the lack of concrete policies from the central government, has fueled the loss of confidence among global investors.
Foreign investors losing hope as China’s post-COVID rebound falters
Foreign investors are beginning to lose hope in China’s post-COVID economic rebound as the country’s recovery continues to falter. After briefly seeing inflows last month, global investors have started to dump Chinese stocks and bonds once again. The optimism generated by the government’s promises of support has faded as the actual policies have failed to materialize. Analysts suggest that the central government is hesitant to take on more debt, leaving little room for expansive moves. Moreover, recent economic indicators, including slowing retail sales and industrial output, have further dampened investor sentiment.
Global investors dumping Chinese stocks and bonds
Hong Kong’s Stock Connect trading scheme, which allows foreigners to trade mainland-listed stocks, saw about $7.4 billion of net purchases after the Communist Party’s politburo promised more support for the economy. However, according to the Financial Times, those gains have almost entirely evaporated. Stock exchanges in Shanghai and Shenzhen have witnessed nine consecutive days of outflows from overseas traders, tying a record streak. Foreign investors sold about $6.5 billion worth of mainland Chinese stocks during this period. In addition, foreign institutional investors sold about $5.2 billion worth of Chinese bonds in July.
Hopes for Chinese economy fade as Beijing fails to deliver on promises
Despite Beijing’s bullish talk of aggressive support last month, the government has not followed through with substantial policies that indicate expansive moves. This has left global investors increasingly doubtful about the prospects of China’s economic recovery. The government’s reluctance to add more debt and its focus on managing financial risks have further diminished hopes. The lack of concrete actions from Beijing has fueled concerns about the economy’s future trajectory and raised doubts about the government’s ability to stimulate growth.
Chinese stock exchanges see nine days of outflows from overseas traders
The pessimism among global investors is evident in the record nine consecutive days of outflows from foreign investors on the stock exchanges in Shanghai and Shenzhen. This streak of sell-offs suggests growing concerns and a loss of confidence in China’s economic prospects. The continued outflows have eroded the gains made after the July politburo meeting, with the CSI 300 index nearly giving back all of its 5.7% gain. The weakening sentiment has also impacted the yuan, which has depreciated by 2.4% against the dollar this month. In response, Beijing has pressured state-run banks to intervene and stabilize the currency.
Pessimism grows as Chinese economy shows signs of worsening
Recent economic indicators indicate a worsening Chinese economy, adding to the growing pessimism among global investors. Retail sales and industrial output have further slowed, while consumer prices have slipped into deflationary territory. These signs of weakening economic activity have contributed to the accelerated pace of selling by foreign investors, which is expected to continue. Even a surprise rate cut by the central bank this week has failed to alleviate concerns. The continued deterioration of various sectors, including manufacturing, consumer goods, and real estate, has further dampened investor confidence.
The loss of confidence among foreign investors in China’s post-COVID economic rebound is evident in the recent wave of stock and bond sell-offs. The lack of concrete policies from the central government and the weakening economic indicators have fueled pessimism and led to an acceleration of selling by global investors. As the Chinese economy continues to falter, it remains to be seen whether Beijing can deliver on its promises and restore investor confidence.
Analyst comment
Negative news. Analyst’s prediction: The market is expected to experience continued selling pressure as foreign investors lose confidence in China’s post-COVID economic rebound. The lack of concrete policies from the central government and weakening economic indicators suggest a further decline in investor sentiment. Beijing’s ability to stimulate growth and restore investor confidence remains uncertain.