Chinese Equities: The month of October in review

Highlights in this article reveal:  

• China maintains a growth rate of 4.9% that was reported on in Q3. 
• Rising corporate buybacks and what this trend signals. 
• An upcoming Central Economic Work Conference in December is expected to provide insights into the government’s strategies. 

China’s economic growth experienced a relatively lacklustre performance in the month of October, marked by a blend of positive and negative indicators. Despite the global economic challenges, China maintained the growth rate of 4.9% that was reached in the third quarter. However, investor sentiment was dampened by a substantial decline in exports, coupled with a drop in the Manufacturing Purchasing Managers’ Index (PMI) to 49.5, down from 50.6 in September. Additionally, the Consumer Price Index (CPI) fell back into negative territory, primarily influenced by falling food and beverage prices. 

China’s economic growth experienced a relatively lacklustre performance in the month of October, marked by a blend of positive and negative indicators. 

Despite these challenges, there were pockets of resilience in the Chinese economy. Car sales remained robust and home sales saw a smaller decline following stepped-up efforts by Beijing to support the property sector. The drag on overall economic growth from the property sector appears to be tapering off, as it now represents a smaller portion of the economy. 

Interestingly, more than 800 listed companies in China announced plans for share buybacks since September. This trend signals that company management and insiders perceive Chinese stocks as attractively valued, despite the negative economic indicators. The surge in corporate buybacks has been particularly notable since the beginning of the year, coinciding with a significant decline in foreign investment into Chinese markets. 

The surge in corporate buybacks has been particularly notable since the beginning of the year, coinciding with a significant decline in foreign investment into Chinese markets. 

Contrary to the economic challenges, household excess savings in China have increased nearly fivefold since the onset of Covid-19. The Central Financial Work Conference, held later in the month, called for a coordinated effort to address the issue of local government debt. As China grapples with economic challenges, close attention is warranted in monitoring Beijing’s policy decisions. The upcoming Central Economic Work Conference in December is expected to provide insights into the government’s strategies and interventions to navigate the current economic landscape. 

Subscribe to our monthly China commentary report for a a detailed and insightful analysis of the state of the Chinese equity market.