China’s stock market is looking for a recovery after a recent fall. According to Bloomberg’s estimates, Chinese stocks slumped to 5-year lows at the end of 2023. Investors’ sentiment was baffled on Friday, February 2, due to market turbulence.
In the meantime, China’s authorities are searching for measures to soothe market jitters. The authorities are eager to revive investors’ confidence and the inflow of foreign investments into the domestic stock market. Beijing aims to introduce urgent drastic measures to mitigate the damage from sell-offs of state-owned companies. As a result of selling their stocks, national companies lost more than $6 trillion of their market value.
Last week, the CSI 300, the composite index of stocks traded on the Shanghai and Shenzhen stock exchanges, plunged by 3.4%. This certainly discouraged investors who rushed to buy Chinese stocks at the beginning of the year.
Nevertheless, despite Beijing’s efforts to calm down market turmoil, the stock market remains highly volatile. Bloomberg says that China’s authorities have not been able to improve investors’ sentiment. The culprit of the doom and gloom in the domestic stock market is unsolved fundamental woes such as mounting economic uncertainty.
The China Securities Regulatory Commission (CSRC), the regulator of the securities and futures industry, intends to contain sharp gyrations of market quotes through massive cash injections. This measure will be implemented in the medium to long term. The regulator has high expectations for its efficiency.
Experts reckon that China’s authorities have to create a kind of stabilization fund in a short time to enhance investors’ confidence. Analysts estimate that the market needs cash injections of at least 10 trillion yuan per month. The CSI 300 has been extending a losing streak for six months straight. The index tumbled by 6.3% in January 2024. The bottom is yet to come.