&w=1024&resize=1024,0&ssl=1 "Chinese stocks suffered their biggest drop since 2020 due to stimulus skepticism world news")
Overseas-listed Chinese stocks suffered their biggest drop in more than four years as investors grew impatient as Beijing's stimulus measures and weak holiday spending data hurt sentiment.
The CSI 300 index fell 7.1 percent, erasing Tuesday's gains as mainland markets reopened after the Golden Week holiday. Although the indicator declined when the Ministry of Finance announced it would hold a briefing on fiscal policy, selling pressure resumed to measure its first loss in 11 days. An index of Hong Kong-listed Chinese stocks fell further on Tuesday after falling more than 10%. Meanwhile, the Golden Dragon index of US-listed Chinese stocks fell 3.7%.
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While stocks have risen in recent weeks following a series of policy announcements aimed at supporting the economy, enthusiasm for stimulus-driven stock growth is cooling due to the lack of any other major initiatives at a key policy meeting on Tuesday. A growing number of strategists and fund managers say Beijing needs to back up its spending promises with real money, while others warn the recovery has been too quick after benchmark indexes rose more than 30% in a matter of days.
Yi Wang, head of quantitative investing at CSOP Asset Management Ltd, said: “The market is torn between expectations of more stimulus and economic reality. “Investors want to see a faster translation of stimulus measures to improve corporate performance, better macro data – whether it concerns inflation, employment or local government debt. But there is a time lag between this expectation and economic reality.”
At a briefing starting at 10 a.m. local time on Saturday, Finance Minister Lan Foan will present measures to strengthen fiscal policy to boost growth and answer questions from reporters, the State Council Information Office said in a statement on Wednesday.
Stock investors have sought greater fiscal spending to avoid a slowdown that threatens to put the country's 5% growth target for 2024 out of reach. Banks including Morgan Stanley and HSBC Holdings Plc expect 2 trillion yuan ($283 billion) in stimulus, while Citigroup Inc. This is equivalent to 3 trillion yuan
'Level of distress'
Wednesday's drop in the CSI 300 was the biggest one-day drop since February 2020. The Hang Seng China Enterprise index, which tracks Chinese stocks listed in Hong Kong, fell 1.6 percent. The indicator erased all gains while onshore markets remained closed.
Investors have begun to worry about a rapid recovery in Chinese stocks since late September unless Beijing announces a strong fiscal package that could revive spending and support the real estate sector.
Returning from a week-long hiatus, Chinese stocks started Tuesday's session with strength – the CSI 300 was up 11% at the open. But the enthusiasm faded when officials at the National Development and Reform Commission failed to announce any more major stimulus measures.
“It appears that authorities, via the NDRC press conference yesterday, are expressing some discomfort with market dynamism, in part due to their difficult experience with retail-driven market volatility in 2015,” said Homin Lee, macro strategist senior. Lombard Odier in Singapore. “It will still be important for them to present a concrete plan to combat inflation at the NPC standing committee meeting later this month.”
Vacation Expenses
China's government bonds rose, with 30-year futures rising 0.8% and benchmark yields in cash markets falling, as investors returned to heavenly assets amid a slump in stocks.
Spending patterns during the Golden Week holiday period suggest consumer sentiment remains weak, despite some signs of stabilization following the flurry of stimulus.
Chinese tourists spent less during the weeklong holiday that ended on Monday than during the pre-pandemic break. Although travelers traveled 10.2% more during Golden Week than in 2019, spending only increased 7.9%, according to data released by the Ministry of Culture and Tourism.
Meanwhile, leveraged equity positions have increased, risking a further decline if the market declines and they have to close. Outstanding margin loans on the Shanghai and Shenzhen exchanges rose to 1.54 trillion yuan ($218 billion) on Tuesday, an increase of 7.4 percent from the last trading session on Sept. 30, according to compiled data by Bloomberg.
As investors debate the fate of Chinese stocks in the coming months, some global money managers are turning to selective stock picking.
Now is the time to take profits in overbought sectors such as insurance, home appliances, electric vehicle batteries, electric vehicles and automobiles, said Louis Lau, a fund manager at Brandeis Investment Partners in San Diego, California. He sees value in sectors such as the internet, sportswear, Macau gaming, food and beverage and tourism.
“We are at a point where stock selection is becoming increasingly important,” said Nicholas Yeo, head of China equities at abrdn Plc, in an interview with Bloomberg TV. “We are in the bullish zone, but there will be volatility. We maintain a long-term vision in sectors such as consumption, which are fundamental to the economy in the long term.”
