China's Stock Market Faces Setback in November Amid Economic Concerns

Chinese stocks are bucking the global trend and experiencing a downturn in November, signaling persistent worries among investors about the country's economic recovery. The CSI 300 Index, representing mainland China's stocks, has seen a decline of over 2% this month, marking the weakest performance among major equity markets worldwide. This downturn is heading into its fourth consecutive month, with the index hovering near a 2023 low recorded in October.

The stark contrast between China's market woes and the global surge, as reflected in the almost 9% rise of the MSCI All-Country World Index this month, raises concerns. The global rally has been largely fueled by speculations that the Federal Reserve has concluded its interest rate hikes.

Commenting on the prevailing sentiment, Willer Chen, senior analyst at Forsyth Barr Asia Ltd, noted, “Sentiment has been so bad. If you look at the macro numbers this month, the only beat probably just comes from retail sales and industrial production. Policy wise, there has been a lot of noise out there this month but nothing concrete or confirmed.”

Recent economic indicators add to the worries, with data revealing a contraction in China's manufacturing activity for November and a contraction in the services sector for the first time this year. Despite efforts by Beijing to stabilize the distressed real estate sector, as seen in regulators compiling a list of 50 eligible developers for financing, the broader market sentiment remains weak.

The real estate sector continues to pose a threat to growth, with falling home sales and property investment impacting demand across various industries. Even positive developments in Sino-American relations during the recent meeting between Chinese President Xi Jinping and US President Joe Biden failed to lift investor confidence. Additionally, major tech companies such as Meituan reported disappointing results, contributing to a decline in market sentiment.

Redmond Wong, a strategist at Saxo in Hong Kong, commented, “Investors have been disappointed by China’s economic recovery while third-quarter earnings and the guidance from companies failed to impress.”

With the CSI 300 down 10% for the year, it is on track for an unprecedented third consecutive annual loss. Global funds are expected to continue reducing their holdings of mainland shares for the fourth consecutive month. However, some global fund managers see potential in the current market conditions. Fidelity International aims to cautiously increase exposure to China, while Invesco Ltd. acknowledges the difficulty of maintaining an underweight position on China given the attractive valuations resulting from the ongoing selloff.

Also Read: Morgan Stanley Picks 3 Stocks to Watch in 2024: Delta, Keysight, and Natera