Chinese stocks notch steepest monthly loss in 6 years as lockdowns hit growth

China’s zero-cube policy has put its stock on track for its worst month in six years, with investors and analysts warning of deeper losses that would follow in the wake of Beijing potentially missing its growth target for the first time.

Missing sentiment pushed CSI 300 stock indexes down 10% this month, with traders Discarding Chinese stocks In view of the difficult closures in cities including Shanghai, the port and the largest financial center in the country. With the possibility of locking in Beijing approaching, more investors fear the worst is likely to happen.

“Global markets have bridged the gap in identifying the serious consequences of China’s zero cube strategy,” said Ting Lu, an analyst at Nomura, which recently downgraded China’s growth estimate to 3.9 percent.

China is aiming Annual growth Of “about 5.5 percent” this year. But, as officials struggle to curb multiple Cubid eruptions, economists over the past week have had to reduce their forecasts to levels once reserved for the worst-case scenarios, pushing the median forecast among financial institutions surveyed by Bloomberg to just under 5 cents.

The darkening forecast prevailed in the markets, with stock indices in China and Hong Kong falling by 5 and 4% this week, respectively. Even leading companies in strategic sectors supported by Beijing recorded double-digit losses this year, with chipmaker SMIC down 29% while CATL, the world’s largest battery maker for electric vehicles, was down 35%.

“It will only get worse before it gets better,” said Andy Maynard, a trader at China Renaissance Investment Bank. He added that while some hedge funds are closing bets against Chinese stocks, “at higher levels, there are massive orders for shorts to come back again.”

Analysts said the fact that China even had a growth target to miss this year stems from initial confidence among senior leaders in their ability to maintain Strict zero cobid approachWhich was voiced by President Xi Jinping.

But the target was set before the highly contagious version of the Omicron corona virus took hold in China, leading to a series of locks along with an increase in mortality data due to Lack of vaccine Among frail elderly populations.

There was no Mass inspections in Beijing Raising Shanghai-style locks, investors are facing the prospect that growth targets that have served as a planet for the world’s second-largest economy for a quarter of a century may not be achievable.

JPMorgan analysts wrote this week that their latest forecast of 4.6% showed that China could “significantly” exceed its growth target “for the first time since an annual target was introduced in the late 1990s.”

They also warned the People’s Bank of China Maybe holding back From a large-scale stimulus on the assumption that the targeted relief measures she has deployed will prove to be sufficient.

“If a policy decision is still based on historical analysis, the risk of non-delivery of the policy is significant,” they said.

Some institutional investors have maintained a positive outlook, even as expectations fall. On Tuesday, UBS Global Wealth Management said it was lowering earnings growth forecasts for Chinese stocks, but still considers them the best bet in the region.

“Although market sentiment is expected to be fragile in the near term, with earnings declines covering the performance of Chinese stocks, we maintain our most preferred ranking for China within Asian portfolios and continue to see value areas,” said Mark Hepha, chief investment officer of the lender’s wealth management business The Swiss.

However, China’s stock market exit hints at global investors not to rush back in, with foreign holdings in equities on land remaining down about $ 26 billion a year to date, despite recent suggestions from local officials that the strength of Shanghai’s lock reached a peak.

“Covid’s case loads in China have eased but overall sentiment has worsened,” Nomura told him, pointing to recent panic shopping in Beijing markets. “We believe the worst is yet to come.”

Chinese stocks notch steepest monthly loss in 6 years as lockdowns hit growth Source link Chinese stocks notch steepest monthly loss in 6 years as lockdowns hit growth

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