Investors Tempted by Cheap China Stocks Amid Slump

China's Stock Markets Face a Two-Year Slump

China's stock markets have experienced a significant slump since early 2021, resulting in a nearly two-thirds decline in their value. This downturn has attracted the attention of investors who are enticed by the cheap valuations of Chinese shares. Despite the market's decline, there are still considerable challenges in China's economy, hindering its recovery.

Investors Show Interest in Chinese Stocks

According to a recent Bloomberg poll, approximately one-third of the respondents expressed their intention to increase their Chinese stock holdings over the next 12 months. This figure marks an increase from the previous survey conducted in August, where only one-fifth of the respondents expressed such interest.

MSCI China Index and CSI 300 Performance

The MSCI China Index, which reflects the performance of large and mid-cap stocks across China, has slumped by 60% since its peak in early 2021. Similarly, the CSI 300, which tracks the 300 Shanghai and Shenzhen-listed stocks with the largest market capitalizations, has declined by approximately 40% over the same period.

China Stocks: World's Cheapest Relative to Profits

The significant market slump has positioned China stocks as the world's cheapest in relation to their profits. This attractive valuation has prompted some investors to consider it a favorable time to acquire bargains in the Chinese stock market.

Challenges in the New Year

However, the new year has not started off well for the Chinese stock market. On the first trading day of 2024, both the MSCI China Index and the CSI 300 experienced declines of 2.5% and 2% respectively.

Cloudy Economic Outlook for China

The economic outlook for China remains uncertain as it continues to grapple with post-pandemic recovery and faces significant challenges such as a property crisis and record-high youth unemployment rates. Even Chinese leader Xi Jinping acknowledged the country's economic difficulties, stating that certain enterprises had a tough time and some individuals struggled to find employment and meet basic needs.

Economists' Concerns

Economists are also expressing caution regarding China's economic outlook. Nomura economists highlighted potential headwinds, including the property crisis, weakening external demand, and geopolitics, which could lead to another economic downturn in the spring.

China's Growth Targets

China has not yet announced its official growth target for 2024. However, government advisors have indicated that they may recommend targets in the range of 4.5% to 5.5%.

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By: htan@insider.com (Huileng Tan)
Title: Investors Tempted by Cheap China Stocks Amid Slump
Sourced From: www.businessinsider.com/china-economy-markets-investors-tempted-cheap-stocks-investment-risks-msci-2024-1
Published Date: Wed, 03 Jan 2024 06:57:49 +0000