2024-01-26 20:34:26
In order to inject a “shot in the arm” into the troubled real estate industry, the Ministry of Housing and Urban-Rural Development of the Communist Party of China announced on Friday (January 26) that all localities should study and propose a list of real estate projects that can provide financing support and coordinate with their respective administrative regions. Domestic financial institutions issue loans. Before the end of this month, the first batch of project lists will be available for loans.
On January 24 (Wednesday), the People’s Bank of China relaxed the lending of commercial banks and lowered banks’ deposit reserve ratios, effectively injecting US$139 billion into the market.
In addition, the Chinese Communist Party authorities have also taken direct measures to curb the decline of the stock market. Chinese Premier Li Qiang convened an emergency meeting of the State Council on January 22 (Monday), calling for “more powerful measures” to promote the stable and healthy development of the capital market. Investors say officials have quietly asked state-backed financial firms to buy shares to help stem the stock market’s decline. Bloomberg reported that the meeting may decide to set up an emergency fund of 2 trillion yuan (about 278 billion U.S. dollars) to support the Chinese stock market. The money will be drawn from the foreign exchange reserves of state-owned enterprises.
The Wall Street Journal reported on January 26 that the series of measures taken by the Chinese Communist Party authorities in an attempt to restore economic growth and stabilize the market indicate that its concerns about the economy are deepening, and that the continued decline in the stock market “has become a political issue.”
Simon Leplâtre, the Shanghai correspondent of Le Monde, wrote an article stating that bad economic news continues one after another, and there is an atmosphere of panic in Zhongnanhai.
Regarding the 2 trillion bailout fund, Le Plat said that this plan has not yet been confirmed, but it seems hopeless: Beijing will not only pay a high price for it, but there is no guarantee of success. In 2015, a similar fund was established after the speculative bubble burst, but it did not avoid the long-term correction of the market.
Some stock analysts have discovered that companies and funds related to the Chinese government have begun to buy index stock funds (ETFs) to stabilize the market.
According to data from Shanghai-based Z-Ben Advisors, which is familiar with the fund management industry, as of Monday the 22nd, the combined net inflows of China’s five largest ETFs reached US$5 billion, setting a new record.
Peter Alexander, founder of Zeben Business Consulting Company, said that it is still uncertain how long this kind of capital allocation will last, but the message conveyed is more important than the funds themselves. “These actions show that in the face of a long-term decline in the stock market, , the Chinese Communist government’s sense of urgency is getting stronger and stronger.”
Aninda Mitra, head of Asia macro and investment strategy at Bank of New York Mellon, said: “While the government has repeatedly claimed to have achieved real growth targets, the market has believed that the nominal growth targets have been met.” Growth is anything but healthy, and there is a serious disconnect between the two that needs to be mended, or at least addressed, for stocks to turn around.”
The New York Times reported on January 26 that the CCP’s actions to save the stock market seemed to have some effect, with the Hang Seng Index recording its best three trading days this year. China’s Shanghai and Shenzhen stock markets also rebounded, although not as much. Because investors have not really returned to the Chinese market.
Daniel Tan, a portfolio manager at Grasshopper Asset Management in Singapore, said, “We will take a wait-and-see approach for now. If the market starts to rebound, there is a lot of upside, but at the moment we have no incentive to buy the dip.”
At the same time, many investors say these measures fail to address a larger issue: the direction of China’s economy. They remain frustrated with the way the Chinese authorities have responded to the widespread economic downturn.
Daniel Morris, an analyst at BNP Paribas, said the market is confident in the Chinese government’s greater efforts to boost the market. I thought all the bad news at the end of last year had been priced in, but it has fallen further this year.
Louis Kuijs, chief Asia economist at S&P Global Ratings, said that domestic confidence is low and the Chinese government is not very interested in supporting the economy. “The market originally had higher expectations, but now it is becoming increasingly disappointed and… Disillusionment.”
The Wall Street Journal reported that at present, it seems that the days when the CCP launched large-scale stimulus packages to vigorously promote the vigorous expansion of the Chinese economy are gone forever.
Hedge fund investor Chua Soon Hock Asia Genesis Asset Management Pte told investors this week that the $330 million fund will close due to short positions on Japanese stocks and long positions on China. The fund suffered heavy losses.
Bloomberg reported that this has sounded a warning to those who are bullish on the Chinese stock market.
Just last month, Tsai took to LinkedIn to extol China’s virtues while slamming China critics and Western media for their “false statements.” At the end of December last year, Cai and his team still believed that the Hong Kong and Chinese stock markets were near the bottom, while the Japanese stock market had rebounded to its peak.
Li Bei, the China Banxia fund manager who has long been bullish on the Chinese market, admitted his mistake after suffering the worst losses of his career, while the value of Chinese stocks held by global investment firm T. Rowe Price has increased over the years. It’s down 80% from its peak.
Zhang Wenchao, general manager of Shanghai Yunhan Assets, said the Chinese market is facing a “serious lack of confidence” and some investors are worried about the possibility of an economic recession. Zhang Wenchao tried to buy declining stocks last week but was soon forced to sell to cut his losses.
After that, he dumped all the stocks he held: “This is too scary, don’t buy the dip.”
Since peaking in 2021, China and Hong Kong stock markets have collectively lost more than $6 trillion in market value.
Luca Castoldi of Reyl Intesa Sanpaolo in Singapore said investors no longer care about China and those who don’t have to invest in China have withdrawn.
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