Software engineer Jackie Jia has been paying more attention than usual to his stock portfolio ever since. China has initiated several measures. It aims to boost a market that has slumped in recent weeks.
Regulators have slashed stamp duty on transactions, curbed moves by major shareholders and approved new share offerings, tightening controls on a series of off-the-shelf moves that have rocked the offshore market.
With reasonable returns on the back of this, 45-year-old Jia is toying with the idea of investing a certain amount of his monthly salary in stocks.
Do you have questions about the biggest topics and trends around the world? Find the answer with Knowledge of SCMPOur new platform brings you curated content, FAQs, analysis and information from our award-winning team.
But something is holding him back. Like many of the 220 million retail investors at home, He didn’t believe it at all Government efforts have gone a long way to set equity funds on the path to a long-term recovery.
“I’m 60 percent sure about the market,” Jia, who works at a Japanese software company in Shanghai, said in a recent interview. Despite the positive feelings on the policy front, he said There is no significant improvement in basic matters“The main issue is lack of money and self-confidence. Of course, self-confidence is more important.”
Chinese stocks rose after authorities halved the stamp duty on trade from August 28. But the long-term outlook is cloudy. Photo: EPA-EFE alt=Chinese stocks have risen since August 28 after authorities halved stamp duty on trade. But the long-term outlook is cloudy. Photo: EPA-EFE>
The task of restoring confidence among retail and institutional investors rests with the China Securities Regulatory Commission (CSRC), which oversees the country’s $10 trillion stock market. President Xi Jinping’s all-powerful Politburo made the move at a meeting in July. Second half economic policy.
Sentiment has been wobbly for several months as expectations of a post-Covid economic recovery failed to materialize and senior policymakers refrained from launching a “bazooka” policy to kick-start growth. The term “bazooka” is often used to refer to a large-scale stimulus package, similar to the one Beijing launched during the 2008 global financial crisis.
The government has taken a more piecemeal approach to economic stimulus. In the latest move, on Thursday, China’s central bank announced a new reduction in the amount of cash banks must hold as reserves.
It will happen, said the People’s Bank of China. Cut the reserve requirement ratio (RRR). For yuan deposits by 0.25 percentage points, to 7.4 percent.
Since January 2022, the CSI 300 index has entered a bear market for yuan-denominated stocks, down 20 percent from February last year.
So far the controller Efforts to rebuild investor confidence They brought some results. The CSI 300 index has halted its decline since April, and some global investors have turned more positive on the outlook, often quoting stock prices under stress.
“The policies in China are clear Support has changed In many respects, Jian Shi is Courtesy and chief investment officer of Switzerland-based Gam Investments, which has $80 billion in assets under management.
“China will contribute one-third to global economic growth this year,” she said in an interview. “The perfect balance shows that China remains a key driver of global growth. In my view, the more specific driver for share prices will be earnings growth.”
The MSCI China Index, a $2 trillion benchmark tracking 755 onshore and offshore stocks, is trading at about 13 times earnings, according to Bloomberg data. This year, the benchmark is down about 7 percent.
The CSI 300 index is valued at 14 times earnings, while the Hang Seng index’s multiple is 6.3 times, putting the two in between. The cheapest key parameters in the worldThe information shows.
China’s move to boost sentiment in stocks Late on August 27, the finance ministry announced it would halve the stamp duty paid when shares change hands, the first reduction since 2008. At the same time, the CSRC promulgated rules. Banning share dilution in listed companies trading below book value or pre-public price, he said, would lower the standard for engaging in margin trading and slow the pace of new share sales.
The reaction from the market the next day was brutal. The CSI 300 index was up 1.2 percent, erasing most of the day’s 5.5 percent gain. This was a far cry from the euphoria 15 years ago when taxes were last cut. The stock benchmark jumped 10 percent on April 24, 2008, the maximum allowed.
For Invesco, which oversees US$1.6 trillion in assets, the benefits of the stamp duty cuts should not be weighed against the gains in shares.
“The stamp duty cut’s implications for investors are bigger than some trade cost savings, as it sends a signal to the market that senior management is paying more attention to stimulating sentiment in China’s stock market,” said Chris Liu. A senior portfolio manager at Invesco, emailed the media on recent comments. “There may be. Additional policy support For the market if necessary in the future.”
Follow-up measures on the cards include extending trading hours, expanding the investment scope of mutual funds and increasing stock investments in banks’ vast pools of – estimated 10 trillion yuan ($1.37 trillion) – wealth management products, he said.
This month, the CSRC published guidelines aimed at revamping the Beijing Stock Exchange, China’s smallest and smallest currency. The watchdog calls for more high-quality listings and more marketers.
Some of the recent consolidation measures have also come at the cost of market-based reforms implemented so far.
The CSRC’s new regulatory oversight of the speed of new share offerings is a hurdle in the registration system for IPOs, a mechanism introduced in February to allow market forces to dictate price and demand. The order hinges on the fate of Swiss agrochemical giant Syngenta Group’s proposed 65 billion yuan IPO on the Shanghai Stock Exchange, which could be the world’s biggest IPO this year.
Still, none of that has been enough to address the concerns of foreign investors, who sold a record $12 billion of Chinese stocks last month in an exchange-linked deal with Hong Kong.
Reduction of stamp duty Gary Duggan, chief investment officer at Dalma Capital Management in Dubai, said the other market stabilization measures are little more than additional moves to answer the Politburo’s call but will have some effect in reversing China’s decline in asset prices.
In the year In the report published on August 28, we believe that the “big bazooka” will not come. “China’s leadership is trying to reform its economy away from over-reliance on the real estate sector and debt growth. We think global investors may not be convinced that a centrally planned economy is the best way to achieve such a transformation.”
Carlos Casanova, senior Asia economist, echoed his views at Swiss private bank UBP.
The spotlight has now turned to China’s captive property market, once a pillar industry that fueled the country’s $18 trillion economy.
Since Beijing introduced it Unknown “Three Red Lines” In the year With policies set to expire in 2020, the industry is reeling from broad-based liquidity stress and declining home sales, triggering a wave of defaults on bond payments and loading leading players such as Country Garden Holdings and China’s Evergrande Group with mountains of debt. This took a toll on the stock market.
In its boldest bailout so far, China has lowered the bar for first-time home purchases and cut down payment requirements and mortgage rates for first-time buyers. The measures are a barometer of national home sales, especially for first-tier cities like Beijing and Shanghai.
At the time Adding in home views And it remains to be seen whether that buying will reverse the slump in the property market in big cities after the announcement – something that will lift sentiment on stocks.
Nomura Holdings is not optimistic, saying Beijing still has a lot to do to solve the housing crisis. Remaining curbs on home sales and land supply, as well as sluggish foreign demand and weak confidence in the private sector, continue to weigh on buyer sentiment, he said.
Meanwhile, any lift in major cities is likely to dampen demand in smaller cities, where prices have fallen sharply due to oversupply, according to the Investment Bank of Japan.
A full industrial recovery may be needed by the government. Rescue major developersLu Ting, China’s chief economist at Nomura, plans to lift almost all restrictions on house prices, curb home buying everywhere, boost infrastructure spending in big cities and tackle debt problems linked to local government funding vehicles.
That said, real estate stocks have been riding the tailwinds of the policy, and not everyone shares Nomura’s gloom. The Hang Seng Mainland Properties index rose more than 9 percent in the past four weeks, outperforming benchmarks in Hong Kong and mainland China. Among the constituents, Sunac China Holdings jumped 68 percent on Sept. 6 and Country Garden rose above US$1 for the first time in three weeks, a level once classified as a penny stock, after reaching a deal with creditors to extend payments on some of its bonds.
“The sound of these policies in the market will increase sentiment, which could create a more favorable environment for equity markets than they are currently subdued,” said Redmond Wong, a market strategist at Saxo in Hong Kong. “With an easy market position and better complements from the recent earnings reported by Chinese corporations, the market direction seems to be related to an upward movement.”
UBS Group is more sanguine, predicting an “inflection point” for Chinese stocks, possibly after lower earnings in the second quarter. Meng Lei, a Shanghai-based UBS strategist at the Swiss bank, said his businesses recommend increasing bets on stocks closely tied to the strength of the economy.
For Jia, which until recently has often been shying away from equity investments, the problem remains. Lowering the transaction tax has helped it pull back from its portfolio’s heavyweights in brokerages and consumer and green-energy stocks this year.
However, it cannot be certain that the decline is over.
The best he can do is hope the government steps up its policies to boost economic growth and, by extension, the market.
“The key is whether the fundamentals of the economy will improve. “The government still has ammunition in reserve.”
This article was originally published by South China Morning Post (SCMP)The most authoritative audio report on China and Asia for over a century. For more SCMP stories, please browse SCMP application Or visit SCMP’s Facebook And Twitter Pages. Copyright © 2023 South China Morning Post Publishers Limited All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Limited. All rights reserved.
