A God awful week for Chinese markets mercifully came to an end, but not before Hong Kong shares closed in a bear market.
City shares fell a sixth consecutive session on Friday and are now down more than 20% from late January.
The benchmark has now retraced around half of the surge from the post-Party congress lows.
The Hang Seng fell more than 6% this week alone. That counted as the worst week since Xi’s de facto coronation in October. For the month, Hong Kong shares are down almost 11%.
Mainland stocks are likewise a mess. The CSI 300 fell a fifth day in six headed into the weekend. Friday’s 1.2% decline was the second-worst since June (last Friday’s selloff was the worst of the year).
In addition to instructing investment funds to avoid being net sellers of A-shares this week, Party officials “asked” management teams of firms listed on China’s Star Board to buy back their shares. Some did. It didn’t matter.
Xi’s silly science and technology gauge gave back most of a pitiable Thursday bounce on Friday to close down 3.7% for the week.
The sell-side continues to cut growth estimates for the world’s second-largest economy. Nomura now sees China missing this year’s target. The bank lowered its forecast to 4.6% citing a “downward spiral.” Both JPMorgan and Morgan Stanley cut their growth outlook for the country this week as well.
Recall that China’s growth target (around 5%) was viewed as conservative or, less euphemistically, underwhelming, when it was unveiled in March. At the time, I offered several possible explanations. “The Party may simply be unsure about the outlook,” I said. “Exports could suffer if global demand falters, the property market is still reeling and the geopolitical environment is fraught.” Fast forward five months and exports are plunging, the property market is apparently imploding and the geopolitical environment remains very challenging.
Evergrande filed for Chapter 15 in New York on Thursday. The developer is still trying to cobble together the specifics of what’s expected to be one of China’s biggest restructurings. Evergrande has $300 billion in liabilities. At least. Many analysts worry Country Garden’s meltdown could end up being even more disruptive.
In the same March article linked above, I wrote that whatever the reasons behind China’s conservative growth outlook, one thing seemed clear. The Party, I said, “doesn’t intend to pursue a ‘growth at all costs’ strategy, and that could pretty easily dent sentiment for Chinese assets.”
I told you so.
