The Chinese stock market entered 2024 with more of a whimper than a roar, having lost a staggering $6.3 trillion since reaching its peak three years before.
Meanwhile, the world’s second-largest economy continues to be buffeted by the same headwinds as the last few years, even after Beijing reported it had reached its goal of 5-percent GDP growth.
Investor confidence has been dampened by deflationary pressures, geopolitical uncertainties ahead of the 2024 U.S. elections, an economic slowdown, and a debt-laden real estate market in a country where 70 percent of household wealth is tied up in real estate.
Earlier this month, the Tokyo Stock Exchange surpassed Shanghai to become the largest in Asia in terms of market capitalization.
Mark Ralston/AFP via Getty Images
Last week, Indian stocks surged, reaching a 157 percent valuation premium over their Chinese counterparts. This reflects a discernible shift in investor preferences between the world’s second and fifth-largest economies.
The Hang Seng China Enterprises Index (HSCEI), an overall measure of mainland securities’ performance in Hong Kong, has experienced a significant decline over the past five years, losing more than half of its value. This downward trend continued last month, with the HSCEI dropping an additional 11 percent.
The FTSE China 50 index, which comprises 50 of the country’s largest and most liquid stocks, reported a 6.44 percent fall in the past five days.
China’s travails are bucking the global trend of resurging stocks buoyed by confidence in Wall Street amid an expected tech boom and expectations the U.S. Federal Reserve will cut interest rates.
The S&P 500 reached an all-time high last year, surging by 24 percent.
Newsweek has reached out to the Chinese Foreign Ministry with a written request for comment.
At the World Economic Forum in Davos, Switzerland, last week, China’s No. 2, Premier Li Qiang, boasted the country’s commitment to achieving its 5-percent GDP growth target without resorting to “massive stimulus,” highlighting a cautious approach amid economic challenges.
Investors had been hoping for an interest cut on Monday to give China’s slowing economy a shot in the arm. But they were disappointed when the country’s central bank chose to maintain a medium-term policy rate.
This move likely contributed to a further dip in stocks and does little to attract foreign investors, who are already gradually backing away from the country. Last year marked the first time in over a decade that foreign investment in China contracted.
A looming demographic time bomb has been cited as a future pitfall for the country’s economy, as China, like its East Asian neighbors, is grappling with a declining birthrate.
Financial analyst Mark Hulbert, however, suggests this demographic challenge will not adversely impact Chinese equities for at least two decades, citing industry trends.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.