China stock rally falters as investors seek fresh impetus
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The setback suggests that sentiment is turning more cautious after optimism over China’s zero-Covid exit
PHOTO: EPA-EFE
BEIJING – Chinese stocks were headed for their worst week in more than a month as investors looked for further catalysts to sustain a world-beating rally since the nation’s reopening.
The CSI 300 Index, a benchmark of mainland shares, was down on Friday, on track to end this year’s run of weekly gains. A drop in the Hang Seng China Enterprises Index, which tracks Chinese stocks trading in Hong Kong, also put the gauge on course for its biggest five-day loss since the reopening euphoria started at the end of October.
The setback suggests that sentiment is turning more cautious after optimism over China’s zero-Covid exit led to scorching gains over the past three months. While data during the Chinese New Year holidays pointed to a comeback in consumer spending, the economy has yet to regain its footing, with weakness in the property market a key drag.
“There is a growing divergence in views on the pace of recovery, with retail investors less confident and expecting only slow and gradual progress,” said Beijing Guanghua Private Fund Management managing director Liu Dejun. “Most institutional investors have increased exposure and remain upbeat over the long term.”
Market reaction was muted even as officials said the border between Hong Kong and mainland China will fully reopen for the first time in three years. Daily quotas and testing requirements will be dropped and all boundary checkpoints will reopen from next week, according to Hong Kong Chief Executive John Lee.
Some of Friday’s worst performers on the Hang Seng China gauge were those that had posted the largest gains in this rebound, including Country Garden Services Holdings and Baidu.
Foreign investors were set to offload mainland shares on Friday for the first time since Jan 3, having boosted holdings at a record monthly pace. Mainland investors have sold a net HK$17.9 billion (S$3 billion) worth of Hong Kong shares this week, poised for the most since 2021.
However, China bulls are likely to see the sell-off as a short-term correction, rather than the start of a downturn. Analysts at Citigroup this week said the reopening trade has more room to run amid China’s strong economic outlook, while those at Jefferies Financial Group anticipate an upgrade in earnings estimates.
“I don’t expect the panic-selling of 2022 to return. However, it is good to be cautious given the strong rally,” said Mr Qi Wang, chief executive officer at MegaTrust Investment in Hong Kong. BLOOMBERG
