According to Bloomberg estimates, foreign investors sold Chinese stocks worth $1.1 billion in early January 2024. Amid such massive sell-offs, January 2024 is the weakest start to the year for Chinese companies in the last 5 years.
Chinese companies slipped into poor performance in 2023. Alas, they are spreading their weakness in early 2024. China’s economy is again hurt by a huge capital flight. Foreign investors need a rock-solid argument to halt their mass exodus and revise their sceptic stance on China’s economic prospects. As of early January 2024, discouraged investors sold stocks to the amount of 7.9 billion yuan ($1.1 billion). Bloomberg experts say it is the worst result in the last 5 years.
In the third week of 2024, Chinese securities were trading at their record lows. Analysts warn that January could be the 6th month straight to record withdrawal of foreign capital from the country. This capital flight is accompanied by low buying activity of Chinese shares.
Experts pinpoint the following reasons behind doom and gloom in the Chinese stock market: a sluggish economic recovery, persistent deflationary pressure, and dubious efficiency of fiscal measures introduced by the authorities to prop up the economy. Amid such fundamentals, investors do not believe in the bullish trend for Chinese stocks. On the contrary, they are rushing to sell them while lots of Chinese state-owned companies are rolling out share buybacks.
The latter is driven by the fact that China’s authorities require state-run firms to spend funds on maintaining their market value. This move is needed to sustain a trustworthy image. However, this situation cannot last indefinitely. Even upbeat economic data is not able to revive investors’ trust. These metrics look strong enough in contrast to 2022 when the economy was crippled by lengthy lockdowns. Nevertheless, China’s economy is underperforming compared to the pre-pandemic economic growth.
Apart from the malaise in China’s stock market, foreign trade shrank by 5% in 2023 from a year ago. Imports contracted by 5.5% whereas exports fell by 4.6%. As of the end of 2023, the CSI 300, the index which mirrors the dynamics of Chinese top companies, collapsed by 11.38%. Hang Seng, the benchmark index of the Hong Kong Stock Exchange, slumped by 13.38% throughout 2023.