Confidence in Chinese equities ‘shattered’

Confidence in the local Chinese equity market has been shattered and is unlikely to come back to previous levels any time soon

To stop trading is serious and from investors the most-hated market intervention. The open questions to reassess the local market are: 1) continuing selling pressure from investors under duress, 2) selling pressure due to leverage, 3) spillover effects to Hong Kong, and 4) consequences on household wealth and consumption.

The MSCI China and HSCEI index have also suffered. Foreign investors exposed to the local market use Hong Kong to proxy hedge their local exposure. Foreign investors investment behaviour is more rational and once the dust settles, they will again focus on whether the Chinese authorities’ latest measures to shore up the economy will work or not. Going forward our strategy is to: 1) reassess the local market and its consequences, 2) evaluate the authorities’ latest measures to stimulate the economy. We will reverse our call if 1) the Chinese authorities run out of tools to support the economy or 2) the measures become ineffective.

There are many open questions to reassess the market. The best place to be invested remains the MSCI China and HSCEI index.


Heinz Rüttimann is a strategy research analyst at Julius Baer

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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