Chinese stocks extended their recent selloff, putting a key gauge of the nation’s equities on track to erasing all the gains seen since last month’s Politburo meeting.
The MSCI China Index dropped as much as 1.1% early Wednesday amid mounting concerns over economic growth. The Hang Seng Index slid more than 1%, inching closer to a technical bear market.
Pressure is building across China’s financial markets given a slew of disappointing economic data, renewed concerns about the property sector and an unfolding crisis in the nation’s shadow banking system. Investors are calling for more aggressive easing by Beijing as the incremental policies so far have failed to revive confidence.
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Market reaction to a spate of stimulus steps has been muted, underscoring the extent of investor pessimism. On Tuesday, the People’s Bank of China cut a benchmark interest rate in a surprise move to shore up sentiment, while policymakers are said to be considering cutting the stamp duty on stock trades for the first time since 2008. Still, they have so far refrained from helping out the heavily indebted property sector and giving consumers more cash to spend.
The price actions today were “another classic day” for China stocks despite the supportive measures, said Willer Chen, senior analyst at Forsyth Barr Asia Ltd. “People are losing patience. With just piecemeal policies, they are getting more and more concerned about the economy.”
The outlook for China’s economic growth is dimming, with investment banks around the world cutting their 2023 forecasts. JPMorgan Chase & Co.’s team lowered its full-year projection to 4.8%. As recently as early May, the bank had been predicting a 6.4% expansion, among the highest calls.
Sentiment was hit further on Wednesday as the latest data showed home prices falling again in July. The property sector’s turmoil has been at the center of China’s economic troubles given its importance to growth and implications across household wealth and the financial system.
“Negative China sentiment has been reverberating through markets and PBOC’s rate cut has again suggested that calls for a massive stimulus may be misplaced,” said Charu Chanana, market strategist at Saxo Capital Markets.
