Updated December 29th, 2023 at 20:23 IST
China and Hong Kong stocks end 2023 as 'worst performers' globally
In the week's final trading session, the index exhibited a 0.5 per cent increase.
Chinese and Hong Kong stocks rounded off 2023 as the globe's poorest-performing equity markets, incurring losses surpassing 10 per cent, despite concluding their best week in five months.
China's prominent blue-chip CSI 300 Index notably marked an unprecedented third consecutive year of downturns amid the nation's stumbling post-pandemic revival and ongoing geopolitical tensions. Nevertheless, amid the turmoil, some analysts discern opportunities within the beleaguered stocks.
The market resurgence
Jefferies, in its 2024 outlook, expressed a tactical shift, adopting a positive stance on China, citing Beijing's economic stimulus initiatives, the resurgence of the yuan currency, and what they term "trough valuation."
In the week's final trading session, the index exhibited a 0.5 per cent increase, culminating in a 2.8 per cent weekly surge. Meanwhile, Hong Kong's Hang Seng Index concluded the day neutral but secured a 4.3 per cent gain for the week.
Despite the positive weekly performance, both indexes resided at the bottom of the 2023 global performance ladder, with the Hang Seng witnessing a dismal 14 per cent slump, marking its fourth consecutive year of declines, while the CSI 300 faced an 11 per cent downturn.
In stark contrast, the MSCI world equity index seemed poised to wrap up 2023 with an approximate 20 per cent increase, showcasing remarkable gains in markets such as the United States, Japan, India, and Mexico.
The investor disappointment
The underwhelming performance of China left investors disheartened, failing to live up to post-COVID recovery expectations. Chief Global Economist at Cumberland Advisors, William Witherell, highlighted persistent issues encompassing widespread housing challenges and local government debt undergoing ongoing rectification processes.
Throughout 2023, property shares took a substantial hit, with Chinese developers facing a staggering 39 per cent downturn. Sectors including retailing, new energy, and tourism also featured among the year's significant losers.
Foreign investment via Stock Connect dwindled significantly in 2023, totaling a meagre 44 billion yuan ($6.20 billion)—the lowest since 2015—marking a substantial retreat of overseas investors since August.
Spotting the potential
Despite the bleak outlook, some discern potential in the distressed stocks. A Shanghai-based hedge fund manager, Li Bei, hinted at a probable market bottom, suggesting that investors underweight on China may feel compelled to adjust their positions in 2024.
Acknowledging the low valuation of Chinese stocks, AllianceBernstein anticipated robust corporate earnings growth in China outpacing that of developed markets in the upcoming year. However, the firm remained cautious, citing geopolitical risks and enduring challenges, opting not to overweight its investment portfolio.
(With Reuters inputs)
Published December 29th, 2023 at 20:23 IST