China Stock market Rout: 10 key factors influencing Chinese equities

The weakness in the China economy has meant that the China stocks have remained under pressure and Chinese equity markets have behaved abnormally  leading to the China indices dipping to five year lows recently before seeing some re bounce now. The Shanghai Composite Index is almost 15% during last one year while the Hang Seng  is down almost 24% in last one year. 

10 Factors influencing China markets currently

1. Weakness in the China economy was fueled by the real-estate sector crisis, where high inventories found no takers. 
2. China local bodies too are facing high debt situation and finding difficulty in paying back the debt point out experts. The Structural headwinds being faced by China in addition to high debt levels are low employment and also an aging population that have further compounded the crisis.                                                                                       Also Read- TCS market cap hits ₹15 lakh crore as stock touches new all-time high
3. As above factors are influencing, the tepid global demand further added to the woes having impacted the exports out of China economy due to lower global demand. 
4.  The weak economic data seen recently have further been putting pressure on the investor sentiments and the China markets.
5.  Experts as Deepak Jasani, Head of Research at HDFC Securities pointed that the China’s securities regulator had vowed to prevent abnormal market fluctuations, after Chinese stocks plunged to five-year lows, but are yet to announce any large specific measure. 

6. The Chinese watchdog however had said that it will crack down on ill-intended short selling, attract more investment by long-term capital, and earnestly listen to investors’ voices, pointed experts.

7.  China’s services activity had expanded at a slightly slower pace in January as new orders fell, a private-sector survey showed on Monday, suggesting a soft start for the world’s No.2 economy amid tepid demand and a property slump. The Caixin/S&P Global services purchasing managers’ index (PMI) edged down to 52.7 in January from 52.9 in December.

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8. A Bloomberg report on Tuesday suggested that the gains in the indices came after Beijing took more steps to stem a stock rout, including widening trading curbs on certain investors and a pledge by the sovereign wealth fund to further increase holdings of exchange-traded funds.

9. News that regulators plan to brief President Xi Jinping on markets as soon as Tuesday also fueled optimism about more concerted efforts to boost stocks. The offshore yuan rose.

10.  China FX Trade System has seen some change with changes in interbank foreign exchange market closing time from 3 AM to 5 PM on February 9th 

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Published: 06 Feb 2024, 02:11 PM IST