China's attempt to rescue its stock market is failing as mainland equity rally falls flat
REUTERS
- China's efforts to prop up its stock market over the weekend led to brief rally that fizzled out on Monday.
- The CSI 300 stock index initially jumped 5.5% but later pared gains to just 1.2%.
- That came as global investors sold a net 8.2 billion yuan ($1.1 billion) of mainland stocks.
A brief rally in Chinese stocks fizzled out in Monday trading, a sign that China's attempts to prop up its stock market are flailing as investors fret over the health of the nation's economy.
On Sunday, the Chinese government announced a package of new initiatives to support its stock market. That included measures like reducing required collateral and slashing a tax on stock transactions in half.
Chinese officials also asked mutual funds in the nation to stop net equity sales to boost its stock market, sources told Bloomberg.
The CSI 300 Index, a benchmark index of mainland stocks, jumped 5.5% early Monday. But stocks then lost most of those gains, with the CSI 300 up 1.2%.
Global investors sold a net 8.2 billion yuan ($1.1 billion) of mainland stocks via Hong Kong trading links, according to Bloomberg.
Friday also saw a similarly fleeting stock rally. After the government unveiled new measures meant to revive the ailing property market, the CSI 300 turned positive. But the index resumed its slide after just 10 minutes.
That comes amid faltering confidence in China's economy, as the nation endures a disappointing economic recovery since dialing back its zero-COVID policies. Demand has failed to revive itself since being battered by the pandemic, which led the economy to slip into deflation this summer.
Meanwhile, China is also struggling from high youth unemployment, key demographic issues, and a hefty pile of debt in its property sector, which has already sparked instability for some of the nation's largest real estate giants.
Experts say that those problems have been years in the making, thanks to China's history of using short-term stimulus in its economy, which skates over its long-term demand issues.
The nation could be on the verge of a "lost decade" similar to the one that slammed Japan's economy in the 1990s, scholars say. That could bring on a debt deflation loop, Morgan Stanley strategists warned, a scenario where prices continue to free-fall while debt rises and economic growth stagnates.