Growth Dragons Weekly: China Government Tried to Help But Made Things Worse For The Stock Market
Here’s what happened in Growth Dragons this week:
China Government Tried to Help But Made Things Worse For The Stock Market
China Team Won Asian Games Esports, Good for Tencent?
Chinese Yuan Keeps Weakening
Hong Kong IPOs Expected to Generate Up to $458 Million This Week
1. China Government Tried to Help But Made Things Worse For The Stock Market
China has been implementing policies to support the stock market but disappointingly, the policies haven’t been able to reverse the stock market fortune. The recent moves were in fact counter-effective and has hurt investors’ confidence.
Firstly, a new regulation prohibiting major shareholders of numerous companies from selling their stakes, while intended to prevent insiders from offloading shares, inadvertently drew attention to the issue, causing investors to become concerned about insider selling. This unexpected focus on the matter triggered more panic than support for the market.
Secondly, Evergrande's chairman, Hui Ka Yan, was placed under police surveillance and that has exacerbated investor fears. While it is essential to hold individuals accountable for major corporate problems, the timing may not have been ideal, given Hui's commitment to restructuring and taking responsibility for resolving the issues. Investors are already on edge due to the property crisis and cannot afford more negative news.
Thirdly, Chinese officials have been systematically cleaning up various industries over the past several years, recently targeting healthcare and semiconductor sectors. While the need for reform in the healthcare industry is evident, the timing of detaining 190 hospital party chiefs raises questions given the current poor investor sentiments. Similarly, the crackdown on corruption in the semiconductor sector cannot be more timely, particularly as China seeks self-sufficiency in response to the US technology ban. This anti-corruption campaign could potentially impede progress, and impact the semiconductor stock prices in the short term.
When these factors are considered collectively, it becomes challenging for outsiders to discern China's motivations, which in turn, impacts their confidence in making investments. Thus, expect more short term weakness in the China stock market. Only time will reveal whether these measures, despite their current impact, will ultimately lead to a better future.