Stocks stuck in a rut in mainland China and Hong Kong as slower-than-expected economic recovery spooks bulls

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by Zhang Shidong and Jiaxing Li at

Bullish stock traders are an increasingly rare breed after underwhelming April economic data dampened belief in a sustained stock rally tied to China’s post-Covid recovery.

The across-the-board data miss – from industrial production and retail sales to fixed-asset investment – has reinforced a sideways trading pattern that has stuck stocks in a narrow range since March, disappointing investors betting on a quick acceleration of economic and earnings growth.

A recent survey of Asian fund managers by Bank of America (BofA) showed that the number of investors bullish on China’s recovery has dropped significantly, with India unseating China as the favourite bet for investors in the region.

“This kind of sideways market is signalling a lack of conviction in either direction,” said Redmond Wong, a strategist at Saxo Markets in Hong Kong. “The economic data is largely cyclical and has large impacts on earnings in the current and probably next one or two quarters.”

Stocks in both mainland China and Hong Kong have barely budged over the past two months as initial euphoria over the end of China’s damaging anti-pandemic measures morphed into concern about the speed and strength of its recovery. Per capita consumer spending during the May “golden week” holiday came in below the pre-pandemic level, and a looming recession overseas may add to the pressure on external demand.

The set of disappointing April data has strengthened the argument that China’s economy is on the mend, but at a bumpy and much slower-than-expected pace.


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