The Chinese economy has been the earliest to recover since the pandemic. However, it has also brought the central bank and government to tighten its policy the soonest.
The CSI 300 Index, which comprised of the top 300 listed stocks in the Shanghai Stock Exchange and Shenzhen Stock Exchange, has lost 15% since reaching a 13-year high last month. This pullback is associated with the growing concern of tighter monetary policy as the economy continues to recover.
According to a China economist at Natwest Markets in Singapore, Peiqian Liu, the Chinese Stock Market is a leading indicator that has revealed the challenge for stimulus withdrawal globally.
The lack of investment choices, a tighter grip on the pandemic, and a fixation with deleveraging are the key factors prompting China to withdraw stimulus faster than other economies.
Analyst at Credit Suisse had downgraded their recommendation on Chinese stocks this week to a sell, predominantly due to the strong economic recovery which sees equity markets “suffer a bigger payback”.
According to Asia Pacific chief investment officer, Jean-Louis Nakamura, they have taken profits on China A-share in early February due to the grim outlook on tighter domestic macro policies.
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