Chinese stock outlook hammered by property crisis, US investment curbs and economic data amid stimulus ‘lip service’

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by Jiaxing Li at

Chinese stocks might not get out of the woods any time soon amid the triple whammy of a deepening property crisis, heightened geopolitical headwinds and a dim economic outlook, analysts say. Beijing’s policy toolbox could be limited and money managers are struggling to see any upside.

The misery spread to every corner of the market last week, after property giant Country Garden’s plunge into liquidity stress further weighed on skittish investors amid Biden’s executive order on US investment in China and underwhelming economic data.

“The China market is in a difficult spot,” said Sherwood Zhang, a Hong Kong-based fund manager at Matthews Asia. “I can only say the downside is limited.”

The CSI 300 Index tracking the biggest onshore companies slid 3.4 per cent last week to post the worst performance in five months, and those stocks’ Hong Kong listed peers capped a second week of losses. The MSCI China Index tracking over 700 companies listed at home and abroad, meanwhile, gave up all its gains this year, sliding to the lowest level since December.

Global investors made a quick retreat by selling 26 billion yuan (US$3.6 billion) worth of mainland stocks last week, with the outflow on Friday alone topping 12.3 billion yuan, the most since October, Stock Connect data showed.

“Rising stresses in China property raise concerns on broader property sector risks,” analysts at Goldman Sachs including Kenneth Ho wrote in a note to clients on Friday. Stabilising the property sector will need further policies to stimulate demand and improve consumer sentiment, as well as more liquidity measures, he wrote.

However, the lack of follow-through stimulus from Beijing so far, widely seen as the key catalyst to kick-start a rally, is unnerving investors. Some have started to question whether the government can deliver the boost they want, and if the downward trend was underestimated.

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