Gross domestic product growth was 5.2% for 2023, hitting
Beijing's target and market expectations. But December data also published on
Wednesday showed the fastest fall in home prices for nine years, an 8.5% annual
slide in sales by floor area and a collapse in housing starts.
Global money managers -- who have been sellers of Chinese
stocks as the post-pandemic recovery has sputtered -- say it will take a long
time or a lot of stimulus to repair a sector once accounting for a quarter of
the economy, and change their minds.
Foreigners have already sold a net 12.4 billion yuan ($1.7
billion) of Chinese shares this year via the trading link with Hong Kong and
more followed on Wednesday with China's blue-chip (.CSI300), opens new tab
index down more than 2% to a five-year low.
Hong Kong's Hang Seng (.HSI), opens new tab slid toward its
largest single-day loss in 15 months after the China data, dropping 4% to its
lowest in more than a year.
The price-to-earnings ratio of the index, a widely-used
valuation measure, is a paltry 7 and its lowest in at least a decade, compared
with 22.2 for the S&P 500 (.SPX), opens new tab.
"Today's data follows a consistent trend in the recent
few months," said Ken Peng, head of investment strategy in Asia at Citi
Global Wealth, at an outlook briefing in Singapore.
Retail sales missed market forecasts and fixed-asset
investment topped them, he said, but government efforts at supporting
innovation and manufacturing are not yet enough to offset the drag from a
deepening slide in real estate.
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"The Beijing government seems to think that the market
and economy have not gotten to a point that's bad enough to warrant a
kitchen-sink policy response," Peng said. "It's the timing and policy
response uncertainty that bothers a lot of investors."
NARRATIVE TRAP
Performance has also been dismal, with mainland shares
lagging global stocks for three years, and surging markets in India, the U.S.
and Japan offer reason to leave.
Intense focus has fallen on some sort of demand stimulus -
however unlikely - as the trigger to draw investors back.
Sid Mathur, head of Asia macro strategy and emerging market
research at BNP Paribas, calls it a "narrative trap" that's grown
after Chinese policymakers doled out large and targeted fiscal stimulus during
downturns in the past few decades.
It's different now, he says, with stimulus of a lower
magnitude and aimed "much more to contain downside risks to long-term
growth than to maximise short-term growth".
Economists have noted, too, that infrastructure spending and
targeted support for green or high-tech manufacturers fails to confront the
confidence crisis that's been unleashed by the collapse in home prices.
"It's true Chinese authorities have rolled out stimulus
measures to prop up the economy, but the effects have hardly played out ...
because the same old infrastructure spending has been overdone in the past two
decades," said Toru Nishihama, chief economist at Dai-Ichi Life Research
Institute in Tokyo.
To be sure, the depth of negativity around China suggests
some kind of bounce is due and technical indicators show stock markets in
over-sold territory. China's bond market has also been rallying and drawing
foreign investment.
But sentiment is so fragile that sustained recovery or the
return of long-term, long-only investors seems distant.
"Pessimism in China is all but entrenched now," Bank of America analysts noted in a survey of 256 Asia fund managers published on Tuesday, with almost 70% of respondents either in wait-and-see mode or looking elsewhere. Reuters
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