China tries to calm its stockmarkets
After Chinese tech stocks plunged, the government said it would introduce policies that would benefit the markets – sending stocks soaring.
“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”.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Nationwide hikes FlexPlus current account fee by £5 a month – is it worth it?
Nationwide’s FlexPlus current account is a favourite with customers, but it’s worth checking whether you are taking advantage of the perks after the monthly fee went from £13 to £18
By Katie Williams Published
-
Santander launches online pension that offers up to £1,000 cashback
Santander's self-invested personal pension offers customers cashback of up to £1,000 if they invest before 25 April next year - here is everything you need to know
By Chris Newlands Published
-
Warren Buffet invests in Domino’s – should you buy?
What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
By Dr Matthew Partridge Published
-
4Imprint makes a strong impression – should you buy?
4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
By Dr Mike Tubbs Published
-
Invest in Glencore: a cheap play on global growth
Glencore looks historically cheap, yet the group’s prospects remain encouraging
By Rupert Hargreaves Published
-
Should you invest in Trainline?
Ticket seller Trainline offers a useful service – and good prospects for investors
By Dr Matthew Partridge Published
-
Key takeaways from the MoneyWeek Summit 2024: Investing in a dangerous world
If you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
By MoneyWeek Published
-
DCC: a top-notch company going cheap
DCC has a stellar long-term record and promising prospects. It has been unfairly marked down
By Jamie Ward Published
-
How investors can use options to navigate a turbulent world
Explainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
By James Proudlock Published
-
Invest in Hilton Foods: a tasty UK food supplier
Hilton Foods is a keenly priced opportunity in an unglamorous sector
By Dr Matthew Partridge Published