Some key headlines from China since the weekend:
The first point rings a familiar tune, with China vowing more stimulus but lacking any details in the announcement. Beijing has been guilty of that for almost two years now. However, after the flurry of announcements before the Golden Week, investors are still clinging on to hope for now.
The CSI 300 index is up another 1.5% today but it doesn’t take away last week’s drop, with the gains today not even erasing the Friday decline as well.
CSI 300 index daily chart
There were questions from three weeks back on whether this was going to be the turning point for Chinese equities.
The surging rally leading up to the Golden Week holiday was certainly something. But as mentioned then, the real test is what comes after that.
One can fathom Beijing’s intentions to pump up sentiment ahead of the biggest holiday in the country and to get people buzzing and feeling good about the government’s promises. But there needs to be some follow through and not just a “pump and dump” to mask the underlying economic situation.
And Saturday’s preach for patience amid a lack of details is not quite the follow through that was hoped for.
That being said, Chinese investors seem to be holding on to hope still with stocks up to open this week. But is it a matter of time before they turn their backs on Beijing again like all the other times in the past two years?
Even with the jump at the end of September, China remains a very interesting opportunity for investors seeking long-term value plays. The question though is how and when will Beijing finally steer the ship away from rough seas.
The downtrend since 2021 has made valuations rather attractive. The only issue now is to look for that turnaround in sentiment. More specifically, one that can actually be sustained in a more significant manner.