Markets are starting to tire of the country’s officials’ wait-and-see attitude.
In one of the most stunning examples of how quickly large stock groups follow gravity, Chinese stocks suffered another notable decline on Thursday. In what is essentially a “no news is bad news” scenario, investors are becoming wary of the lack of details from the country’s authorities about the recently announced stimulus package. The explosive “stimulus rally” was quickly overtaken by a rout.
Similar to previous bearish sessions for Chinese titles, this affected companies in various sectors. technology companies GDS Holdings (GDS -3.82%) and tencent holdings (TCEHY -1.90%) On this day, the price of the company’s US-listed shares fell 2% and 4%, respectively. In the electric vehicle (EV) industry, which is attracting attention, lee auto (Lee -5.23%) The deceleration further accelerated, putting the brakes on a 5% decline by the close of the U.S. market.
Is it too little too late?
It’s good to announce a broad-based stimulus package, but it’s important to include as much content as possible in the outline. Chinese authorities have so far revealed some details of the program. However, these were not enough to sustain the initial rise.
Unfortunately, Thursday was no different. The country’s Housing Minister Nee Hong held a press conference in which she (was expected) to explain many details of the program – at least as it pertains to the country’s difficult real estate market.
The minister announced that the government would raise financing estimates for unfinished residential housing projects by almost 100% (by 4 trillion yuan, or $562 billion), but for the most part he echoed the statements of his fellow government officials. I was just parroting it back.
Another factor causing investors to retreat from Chinese stocks is the data set scheduled to be released on Friday. The most notable figure is undoubtedly the third quarter gross domestic product (GDP) growth rate. According to a poll conducted by Reuters, a 4.5% increase from the previous year is expected. If achieved, it would be the lowest figure since the first quarter of 2023.
This rate is the envy of many countries, but China is an exception. Not so long ago, quarterly growth was much higher than that, as the country strived to become the world’s factory. However, these hot numbers have cooled down, and this trend is expected to continue. By comparison, GDP growth in the second quarter was 4.7% year-on-year.
We are waiting for more
All things being equal, securities are traded based on future expectations rather than past performance.
And that is the root of the current problem with Chinese stocks. Without sufficient details, even the most seasoned stock pickers cannot predict how the promised economic stimulus will affect the many economic sectors and individual companies seeking government-level support. It’s difficult to judge. As I’ve previously opined, it’s probably best for investors to stay on the sidelines for now until we get a little more clarity.
Eric Volkman has no position in any stocks mentioned. The Motley Fool has a position in and recommends Tencent. The Motley Fool has a disclosure policy.
