Stephen Innes
SPI Asset Management
Chinese stocks in Hong Kong started the week on a lower note, with ongoing concerns about the property sector overshadowing optimism stemming from signs of economic data stabilization.
Chinese developer Country Garden Holdings Co. faced two significant tests on Monday, including an initial deadline to pay interest on dollar bonds and the end of creditor voting on its request to extend payment on a yuan-denominated note.
So despite the recent signs of growth and inflation bottoming out amid measures taken by Beijing to boost investor confidence, foreign funds have been talking with their feet, exiting Chinese stocks en masse. Chinese market's influence among global fund managers’ portfolios is reaching the un-investible zone due to the accelerating economic decoupling from the rest of the world.
There is absolutely no escaping the various financial and economic risks China faces, with the property market being a chief concern. Although property sales showed a slight month-over-month increase in August, other key indicators, such as new housing starts, total floor area under construction, and property fixed-asset investment, continued to decline. Additionally, data from the National Bureau of Statistics for 70 major cities indicate that property prices have fallen in most cities, both in primary and secondary markets.
This decline in housing construction results in reduced land sales revenues for local governments, and falling property prices will likely exert economic pressures for several quarters ahead. While there has been an increase in policy support in the near term, the challenges in the property market persist and will require sustained efforts to address.
While there have been signs of economic recovery in certain areas, the primary concern for the market continues to be the property sector. The rebound in property prices and transaction volumes appears to be concentrated in larger cities, leaving many areas with ongoing challenges in the real estate market. This concentration of recovery in major urban centers highlights the complexity of addressing issues within the property sector and the potential disparities in economic performance across different regions in China. Hence, there is no single fix-all policy measure.
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
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