An intervention in the stock market. Liquidity injections by the central bank. More curbs on short selling. And yet, Chinese stocks can’t escape the real estate sector’s spiral of gloom.
Data this week showed that property investment — a key driver of China’s economic activity — continued to slump, while home prices fell at the fastest pace in almost a year in September. That negated investor optimism over a data showing a pickup in third-quarter economic growth.
The main CSI 300 Index slid more than 4 percent to cap its worst week in a year on Friday, erasing all the gains seen during its epic reopening rally that took off late last year. The selloff came despite the slew of market-boosting policies, including tightening of curbs on short-selling activities.
“Investors need to see a way out of all the major problems, like the property woes,” said Hao Hong, chief economist at Grow Investment Group. “How Beijing manages its property market and handles its relationship with the US” are key, he said, adding that “nobody cares about economic data” right now.
Weakness in global stocks spurred by geopolitical tensions in the Middle East worsened the pain for China’s market, with foreigners offloading 24 billion yuan ($3.3 billion) of onshore stocks on a net basis this week. That’s the most since the week ended August 18. Still, Morgan Stanley advised against buying the dip, cautioning that sentiment is likely to stay fragile and foreign fund outflows could persist.
A Bloomberg Intelligence gauge of Chinese developers’ stocks hit its lowest level since 2009 this week as efforts to boost the housing market failed to win over investors. Homebuyers remain cautious and several large developers like Country Garden Holdings Co. continue to suffer from liquidity