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China’s stock market has bounced from a nine-month low this week, which may have been driven by too much hot air and less earning power. No wonder foreign funds are not impressed or convinced by this.
Nearly 76 per cent of onshore-listed companies have cut their 2023 earnings outlook, with all sectors seeing a net decline, according to Bank of America. Corporate earnings declined in the last quarter, leading to a 2.4 percent decline in the first half of 2023 from a year earlier, he said.
“The results reflect a challenging operating environment amid broad headwinds,” strategists including Willy Chan said in a note to clients on Monday. “We are concerned that the market will need to further revise 2023 earnings.”
Bank of America based its analysis on the latest earnings reported by 4,367 non-financial companies, with declines most prominent among companies in the materials, energy and technology hardware sectors.
01:20
Chinese President Xi Jinping will not attend the G20 summit in New Delhi, India
Chinese President Xi Jinping will not attend the G20 summit in New Delhi, India
The CSI 300 index, which tracks the largest onshore companies listed in Shanghai and Shenzhen, fell last month amid an exodus of foreign funds, hitting its lowest level since November on August 23. The index climbed 2.2 percent last week. most in a month, It declined by 0.7 percent on Tuesday. Beijing has launched a series of incremental measures Reduction in down-payment requirements buying a house, halving stamp duty on stock trading, and reducing the reserve ratio on foreign currency deposits to help improve confidence and prevent the depreciation of the yuan.
Hong Kong bank rates, insurance, yuan slide feed rush for safety in US dollar
Foreign investors may have used the rebound to further cut their stakes amid the biggest selloff on record. They sold US$12 billion worth of A-shares in August, the largest monthly outflow since the Stock Connect scheme began in 2014, according to data compiled by Goldman Sachs.
They have bought 2.2 billion yuan (US$303 million) through the plan’s northbound channel this week.
01:55
Malaysia’s billion-dollar ghost town project linked to China stalled due to COVID and capital restrictions
Malaysia’s billion-dollar ghost town project linked to China stalled due to COVID and capital restrictions
Goldman last month cut its 2023 earnings growth forecast for the MSCI China Index to 11 per cent from 14 per cent. Tensions in China’s property market, where Country Garden is facing bond default trials, and its potential second-order impact on financial markets and the broader economy could impact earnings.
China’s service activity Slowest expansion this year in August, as stimulus failed to meaningfully revive consumption. A government report later this week showed China’s exports are likely to decline for a fifth month in August amid slowing global demand.
‘Buy the dips’ as strong China stimulus could power months-long rally: BofA
China’s current growth slowdown will be more difficult to reverse than in the past, according to Montreal-based research firm Alpine Macro. Nevertheless, history shows that one should not underestimate the ability of the Chinese authorities to make sudden changes to jumpstart the economy.
“We prefer to stand on the sidelines for now” on Chinese stocks, Yan Wang, chief China strategist, wrote in a note to clients on Tuesday. “Upside is limited by headwinds, and downside is limited by cheap valuations and extreme bearish sentiment and conditions.”
Bank of America said earnings momentum has weakened since May, despite recent policy moves to boost sentiment. Fundamental changes in the economy and markets will take time, while structural reforms are also needed.
“The market is waiting for more concrete measures,” the bank said.
Source: amp.scmp.com
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