Investors overestimate China – Kommersant FM

International investors have become disillusioned with the Chinese stock market. At least this is reported by the Financial Times, citing a survey of Goldman Sachs conference participants: more than 40% of them said that China is “unsuitable for investment.” This opinion may be associated with the recent collapse of shares totaling $2 trillion, the publication suggests. And losses from investing have been recorded by investors for the last three years.

Are such conclusions justified? Economist, author of the “Chinese Threat” project Nikita Mitrofanov believes that the trend is related to geopolitical tensions and internal problems of the country’s economy: “For the last few months, capital has been withdrawn from China by Western investors, including American, European and British, and this is very noticeable. Against this background, it is obvious that the country’s stock indicators will fall.

Let’s not forget that there is confrontation between the United States and China. Perhaps such a withdrawal of capital from China is a response to the republic’s actions in relation to the dollar.

After all, Beijing has been very active in withdrawing from American bonds over the past two years, which significantly affected the cost of US debt and the value of the dollar/yuan currency pair. Over the past few years, China has been considering ideas to make its national currency an alternative to the dollar.

In addition, the Chinese economy has some problems in the short term. They are connected primarily with the fact that, according to industrial indicators, China seems to be sliding slightly into deflation – prices for certain goods, works, and services are falling. Investments in such conditions lose their meaning, especially in risky instruments.

Meanwhile, there is always talk that China is not growing the way it wants, so perhaps we need to reconsider our assessments of the country’s future in terms of how much we expected to receive from them and how much we can now acquire in terms of investing. This revaluation may not have been in favor of the PRC.”

In January 2024, Beijing tried to stimulate the stock market; in particular, the authorities intend to create a stabilization fund and buy shares on the domestic market through the Hong Kong stock exchange. It was filled with more than 2 trillion yuan.

Such surveys of investors can hardly be indicative; it is possible that the trend will soon reverse and the Chinese stock market will grow, noted Lyudmila Rokotyanskaya, stock market expert at BCS World of Investments: “Facts about cash flows are a more reliable indicator than survey results . For example, a couple of weeks ago a Bloomberg article was published, which provided the following data: according to Bank of America, in the week before January 24, a record influx of funds into shares of developing countries was recorded – $12 billion, this is a record since July 2015. Moreover, almost all of this amount went to the Chinese market, to funds that invest in Chinese stocks.

The agency itself explains this phenomenon by the fact that, firstly, this market is very undervalued. It’s actually at the bottom. Secondly, Western investors, in particular American ones, clients of the same Bank of America, have developed an appetite for risk. The market is waiting for a reversal in the Fed rate; some interest in developing countries is already appearing.”

The massive drop in China’s stock market came a day after Chinese Vice President Han Zheng called for “more decisive and effective measures to stabilize the market.”

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Elena Ivanova