China's real estate problems cast doubt on stock-boosting measures

 China's real estate problems cast doubt on stock-boosting measures

a stock market intervention. infusions of liquidity from the central bank. More restrictions on short sales. But despite the spiral of doom in the real estate industry, Chinese equities are unable to recover.

Data released this week revealed that China's economy, which is mostly driven by property investment, is still in a depression. In September, housing values plummeted at their sharpest rate in over a year. Investor elation at data suggesting a pick-up in third-quarter GDP growth was dashed by that.

The primary CSI 300 Index lost more than 4 percent on Friday to end its worst week in a year, wiping out all the gains made during its historic reopening boom that erupted in the latter part of the previous year. The selloff occurred in spite of a plethora of market-boosting regulations, such as tighter restrictions on short-selling operations.

Hao Hong, chief economist of Grow Investment Group, said that investors "need to see a way out of all the major problems, like a characteristic woes." He said that "nobody cares regarding economic data" at the moment, adding that "how Beijing manages its property business and handles its relationship with the US" are crucial.

Geopolitical worries in the Middle East contributed to the decline in global markets, which made China's market more painful. This week, foreigners sold 24 billion yuan ($3.3 billion) worth of onshore stocks on a net basis. The most since the week that concluded on August 18, that is. However, Morgan Stanley recommended against purchasing the drop since sentiment is expected to remain shaky and more outflows of foreign funds is possible.

Low down

This week, a measure of Chinese developer stocks by Bloomberg Intelligence fell to its lowest level since 2009 as attempts to expand the housing sector failed to attract investors. Homebuyers are still being cautious, and some major developers, like Country Garden Holdings Co., are still having liquidity issues.

According to Elizabeth Kwik, executive director of Asian Equities at abrdn, "the and the next thing that will drive the rally that we've been anticipating for" is "if there is security on the real estate side and a pick up in consumer demand."

The Third Plenum, the Politburo Meeting, and a prospective meeting between US President Joe Biden and President Xi Jinping at the APEC Summit next month, according to some market observers, might all act as triggers. 

Property and local government debt are the two main dangers that Minyue Liu, an investment expert for Asian and Greater China stocks at BNP Paribas Asset Management in Hong Kong, sees as threatening the Chinese economy. These problems haven't been solved yet. We learned that the administration is developing a thorough strategy. We do anticipate a prompt announcement on this.

According to sources familiar with the situation, Bloomberg last week reported that China is contemplating creating a state-backed stability fund to boost trust in its $9.1 trillion stock market. Following the announcement, the CSI 300 Index temporarily cut losses, although it still ended the day in the red.

As investors set a high bar for positive news, the gauge, which is down almost 10% in 2023, is poised for a record third consecutive year of losses.

According to Tina Teng, an analyst with CMC Markets in New Zealand, "Recent measures taken by the government cannot solve the economic issue that China is facing, particularly in the property sector." "Investors are still apprehensive despite the latest encouraging statistics. To persuade them, the statistics must be consistent and keep getting better.