China’s Shanghai and Shenzhen equity markets are on track to close 2023, a dismal one, in the range of 7% – 11% down. Much of this decline was seen in 2H as the property sector declined which impacted consumer sentiments and wider China’s economy. Offshore yuan saw a fall of 6% as compared to the dollar by mid-year, with traders looking for much needed interest rate cuts, but saw a rally to close the year down by just 3%.
China’s economy not on track
Since China is not yet back to previous strong economic growth rates, there have been some signs of recovery, with projections for 2024 coming to the tune of 5%-plus GDP growth and a final end to deflation with property sector debts being now resolved.
Chinese banks reduced their deposit rates. Now the question arises “Why Chinese authority is being cautious in their monetary policy, instead of reducing rates aggressively to help its economy?” This is because easing monetary policy too rapidly might lead to wider yield gap with that of United States, leading to greater depreciation pressure on yuan. This will undermine its international adoption, which is still an important political goal. Coming to the Chinese stock market news, equity indexes failed to follow the equity market rally in the US last week, as Shanghai Composite Index and Shenzhen Composite Index saw a fall of ~0.8% and ~2.0%, respectively. For the year, indexes are now down by ~6.5% and ~10.9% respectively.
Chinese stock market news
While Chinese stock market news are being tracked by global investors and analysts, right now the focus is on China and Russia’s economic partnership, which has tightened lately. Both the countries have ramped up discussions of accelerating economic and energy cooperation as both sides plan several high-level interaction. Foreign direct investment (FDI) in China saw a fall of ~10% in first 11 months of 2023 in comparison to the value in the similar period of previous year.
Coming to the stock-specific news, Tencent lost ~$43 billion in its market value after the country proposed new online gaming rules. Prosus NV saw a fall of ~20% in Amsterdam trading, resulting in the reduction of ~€15.5 billion ($17.1 billion) of its market value at one point during the day, after the rules led a blow to the value of the company’s holding in Chinese internet giant.
On Friday, Hang Seng Index saw a sharp fall of ~1.69% to close the day at 16,340.41.
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