Chinese stock markets have been experiencing significant declines, with about $6 trillion wiped off the value of Chinese and Hong Kong stocks over the past three years.
The country’s economic growth has slowed, and there is concern about the lack of effective policies to spark a sustainable recovery.
Investors are worried about Beijing’s approach to economic reform and the impact of tensions with the US.
“The past three years were no doubt a challenging and frustrating period for investors and market participants in Chinese equities,” Goldman Sachs analysts wrote. “China … [is] currently trading at suppressed valuations and decade-low allocations across [investment] fund mandates.”
“There has been increasing confusion over the Beijing’s policy stance on the economy,” Nomura analysts noted.
“The (central bank) did not deliver a much expected cut of its benchmark lending rates last week. Top officials’ comments suggest Beijing is reluctant to seek short-term growth at the cost of increasing long-term risks,” they said.
“Conventional macro policy easing has so far fallen short of investor expectation,” they wrote. “A shift in the piecemeal easing playbook to a more aggressive, big-bang approach may be needed to overturn the negative narrative in the market.”
The government is considering measures to stabilize the stock market, including potential interventions and the establishment of a stock market stabilization fund.
The stock market decline has sparked public anger and calls for effective regulatory measures to address the situation.
“If the rumour proves to be true, the asset purchase program could generate a significant size of [yuan] purchase flow,” Mizuho Bank’s Ken Cheung said.
“I’m sad about today’s stock market performance,” former editor-in-chief for the Global Times Hu Xijin wrote online.
“The impact of the stock market’s continuous decline has gone beyond the capital market, and has a negative impact on confidence in the entire economy and comprehensive social confidence. I personally believe that this is an urgent issue that needs to be addressed to prevent financial risks and boost social confidence.“
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