SINGAPORE – Promises of policy support and a possible meeting between tech giants and China’s leaders this week have helped stem a rout in the country’s stock markets for now, but investors expect it is unlikely to attract new inflows until the economy stabilises.
Mainland and Hong Kong equities have dramatically underperformed global peers in the last few years as trade tensions, regulatory crackdowns, the pandemic and now fresh COVID-19 lockdowns have hurt confidence and company earnings.
Moreover, the once-mighty property sector has been in contraction, cut adrift from credit since major developer Evergrande defaulted on bond payments last year.
Hopes are focused on vague promises of help – last week from the powerful Politburo and in March from Vice Premier Liu He – as well as a chance that a high-level meeting could signal an end to a long crackdown on the internet sector.
“There is a lot of potential upside here,” said Mohammed Apabhai, Citibank’s Asia-Pacific trading strategist in Hong Kong, who said investors now seem inclined to buy dips as they wait for supportive rhetoric to turn in to action.
“Positioning is so light … that it doesn’t take very much for this market to be able to put together a fairly substantial move,” he added.
Talks between tech firms and Chinese leaders, reportedly set for Friday, are one source of guarded optimism, even if that may not trigger an immediate rush back to the heavily-sold sector.
Food delivery giant Meituan was among those invited, one person said, while the South China Morning Post reported last week that Alibaba Tencent and TikTok owner ByteDance had also been invited. – Reuters
