“Chinese stocks are on a roller coaster”, says Paul La Monica for CNN. The country’s tech shares had plunged in recent weeks, with the Nasdaq Golden Dragon index of US-listed Chinese tech plays down 38% during the month through 14 March. Beijing’s crackdown on tech firms, “worries about leading Chinese companies possibly getting delisted in the United States” and a surge in domestic Covid-19 cases had all weighed on sentiment.
On 16 March, regulators came to the rescue. A top financial policy committee chaired by vice-premier Liu He announced that the government would “actively roll out policies that benefit the markets”. Investors took it as a “trend changer” and Chinese stocks had their best day since 2008, says Ipek Ozkardeskaya of Swissquote. The Golden Dragon index soared almost a third, while the Hang Seng Tech index leapt 22% in Hong Kong.
Starting to worry
The change shows “how worried policymakers have become about the markets, real estate and the economy”, says Bill Bishop in the Sinocism newsletter. The announcement is clearly a signal that regulators “don’t want markets to go down more”. Still, investors shouldn’t bet on a complete end to a crackdown that has hit the likes of Alibaba and ride-hailer Didi. This may mark “more of a calibration to stabilise things” rather than a “real shift”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
China’s “techlash” has led to “colossal value destruction” for investors over the past 18 months, says The Economist. “Liu’s statements are the strongest signal so far” that this pressure is ending. That may mark a bottom, but it won’t reverse the losses that investors have already sustained. Shares in tech giant Tencent gained $112bn in two days, but are “still down by around half” since their early 2021 peak.
Geopolitics also looms large. “Something big is happening in global capital flows”, says Robin Brooks of the Institute of International Finance. “China… is seeing big capital outflows, while the rest of [emerging markets] gets inflows.” That has “never happened before on this scale and reflects asset managers looking at China in a new light after Russia’s invasion of Ukraine”. The rush to exit Russian assets is making some reconsider Chinese holdings as well.
Optimists are hoping that “last year’s bruising clashes between the state and the stockmarket” are over, says Leo Lewis in the Financial Times. Previous “confidence-boosting” measures like this, such as after the global financial crisis, have turned markets around before. But those happened in an era “where globalisation still felt fundamentally unstoppable”. Today, talk of de-coupling and shorter supply chains makes that seem less certain. Chinese markets will increasingly be a “proxy for investors’ views on the future of globalisation”.
-
US stock trading app Robinhood launching in the UKThe low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
-
New property listings rules: What should an estate agent be telling you?
News New guidance tells estate agents what must be included in property listings - here is how it affects buyers and sellers
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
-
EasyJet shares are volatile but enticingly cheap
The EasyJet group has shrugged off the cost-of-living crisis, restarted dividends and shares look good value.
-
The fallout from the war on landlords
Investors fleeing the market and the rise in rents are affecting us all.
-
Eight small-cap trusts to bet on
Funds investing in market minnows are out of favour, but the cycle will turn. Here are the best bets.
-
Trust in US TIPS to beat inflation
In an inflationary market TIPS, the US Treasury Inflation-Protected Securities are most compelling says Cris Sholto Heaton.
-
What is Vix – the fear index?
What is Vix? We explain how the fear index could guide your investment decisions.
