China Market Commentary for January 2024
In January, the Chinese small-cap and micro-cap segments were hardest hit by the economic downturn, largely due to the lack of concrete policy responses to boost business and consumer confidence. Additionally, investor sentiment was further dampened by concerns over the US-China relationship, including the possibility of Donald Trump being re-elected and his comments on imposing more tariffs on Chinese imports.
Chinese Equities: The month of January in review
Highlights in this article reveal:
- How the markets faced pressure from derivative products known as ‘Snowballs.’
- The knock-on effect by the Shanghai Composite index.
- Which sectors outperformed and which sectors lagged.
The market was also impacted by technical-driven selling pressure from derivative products known as ‘Snowballs,’ which provide a bond-like coupon.
The market was also impacted by technical-driven selling pressure from derivative products known as ‘Snowballs,’ which provide a bond-like coupon as long as stock indices trade within a certain range but could incur substantial losses in a volatile market. Consequently, the Shanghai Composite index dropped below the 2,700 level, prompting intervention from China’s state funds, commonly referred to as the “National Team,” to stabilise the market.
Notably, there were significant inflows into CSI300 ETFs towards the end of January, aimed at supporting key index levels.
Notably, there were significant inflows into CSI300 ETFs towards the end of January, aimed at supporting key index levels. Among sectors, Energy, Financials, and Telecom outperformed, buoyed by the National Team’s buying, while Auto, Healthcare, and Technology sectors lagged.
For further insights from the RisCura team, download the full report.
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