Down Angle Symbol A symbol in the form of an angle pointing downwards. Investors pay attention to the stock market at a securities trading hall in Fuyang, China, December 29, 2023. Costfoto/NurPhoto/Getty Images
- A third of respondents to a Bloomberg survey said they plan to increase their Chinese stock holdings.
- Some investors say they are being tempted by cheap valuations of Chinese stocks after a two-year downturn.
- There are still significant headwinds for the Chinese economy, which is struggling to recover.
China's stock markets have been in a tailspin since the start of 2021, losing nearly two-thirds of their value – leaving some investors very, very tempted.
Nearly a third of 417 respondents to Bloomberg's weekly Markets Live Pulse survey said they plan to invest more in Chinese stocks in the next 12 months, the media company reported on Tuesday. This is an increase from a fifth of respondents in the August survey.
The MSCI China Index – which reflects the performance of large and mid-cap stocks across China – has plunged 60% since its peak in early 2021.
Meanwhile, the CSI 300 – which tracks 300 stocks with the largest market capitalization listed in Shanghai and Shenzhen – has fallen about 40% over the same period.
The market slump has left Chinese stocks the cheapest in the world relative to their earnings, prompting some investors to think it's a good time to pick up some bargains, according to Bloomberg.
But the two indices didn't have a good start to 2024 either – the MSCI China Index lost 2.5% on Tuesday, the first trading day of the year. The CSI 300 is down about 2% so far this year.
The outlook for China's economy is dim as the country continues to struggle to recover from the pandemic and faces significant headwinds from a housing crisis and record high youth unemployment rates.
Even Chinese leader Xi Jinping offered a rare acknowledgment of China's economic woes on New Year's Eve, saying some businesses were having a “tough time” and some people were having “difficulty finding work and meeting their basic needs.”
Economists are also not so optimistic about China's economic prospects.
Nomura economists wrote on Tuesday that there could be another “economic slump” this spring due to headwinds such as the housing crisis, weakening external demand and geopolitics.
China has not announced its official growth target for 2024, but government advisers told Reuters in November they would recommend targets in the range of 4.5% to 5.5%.
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