An investor looks at an electronic board with stock information at a brokerage house in Nanjing, Jiangsu Province, China.
Reuters
BEIJING – Chinese stocks on the mainland have tumbled over the past few days as authorities set a relatively low GDP target and a shift in policy aimed at keeping the economy afloat in the wake of the coronavirus -pandemic.
The composition of Shanghai has fallen by more than 5% over the past five trading days, with the losses rising to the lowest index since December this week, according to Wind Information. Other continental stock indices, such as the Star 50, which follow big names on the technology stock market, and the CSI 300 have fallen nearly 8% or more over the past five trading days.
The indices rose on Wednesday after US markets recovered overnight from a recent sell-off.
After the significant gains in the Chinese mainland over the past six months, investors have focused on two things, Tai Hui, chief market strategist at JPMorgan Asset Management, said on Wednesday.
One is concerns about the setback of supportive fiscal and monetary policy based on comments from China’s annual parliamentary session; the other is the sell-off in the U.S. market, especially in high-tech stocks, he said.
Top officials of the People’s Bank of China and the banking regulator warned this month about financial market risks. Their comments come in conjunction with China’s biggest political event of the year, the “Two Sessions” parliamentary session.
China targets ‘very conservative’ GDP target
As part of the meeting, Chinese Prime Minister Li Keqiang announced on Friday that the country wants to target GDP growth of more than 6% for the year, on the low side of many economists’ estimates. Li said no new bonds would be issued to respond to the pandemic and that the deficit and inflation targets would be lower than last year.
In a report, Citi analysts called the GDP growth target ‘very conservative’, saying it would ease pressure on policymakers to achieve rapid growth, enabling them to take stricter measures to reduce risks in equities and the real estate market. to contain.
As a result, they expect governments to limit growth in lending, and limit the potential amount of capital that stocks can buy. Citi analysts estimate that the CSI 300 could fall by 10% on Friday, March 5th.
The CSI 300 fell by about 4% from the close of Friday Wednesday afternoon.
Economists in China have been keeping a close eye on US markets, with the government’s stimulus and a 10-year rise in US Treasury yields raising some concerns about the risks of ‘imported inflation’. So far, local benchmarks of such price increases remain muted. China has a 0.2% drop in the consumer price index for February from a year ago and a 1.7% rise in the producer price index.
Long-term investment themes
Instead, market strategists point to longer-term opportunities in Chinese equities, given the recent sell-off and disclosure of details for the country’s five-year development plan starting this year.
The development roadmap, known as the 14th Five-Year Plan, aims to sharpen China’s technological capabilities, increase the role of consumption in promoting economic growth and address issues such as China’s aging population.
Xuan Wei, chief strategist at China Asset Management, said in a statement that he was optimistic about investing in technology, consumer trends and medicine in the medium to long term.