Just as FOMO over the big Chinese stock rally was peaking, a disappointing government briefing has brought everyone back to reality.
Investors were hoping for even more aggressive stimulus. So, when a highly anticipated government briefing fell short of expectations, lots of FOMO-driven “hot money” players decided to cool their heels.
In a flash, China wiped out half of its stimulus-driven gains, and the outlook is now looking bleaker by the minute.
The Chinese central bank’s recent actions are too big to ignore, though. And, with India opting to keep its interest rates steady earlier this morning, foreign investors might still find China hard to resist.
In a soup?
- The Hang Seng Index in Hong Kong is in the (hot money) soup after gains of 27% clocked over two weeks were halved in just a day.
- But China should be tasty nonetheless: forget stimulus, these stocks are trading at beaten-down valuations of 11 times forward earnings. That’s a more than 50% discount on US stocks!
“Don’t be too disappointed,” says Jing Liu, the chief economist for China at HSBC. It’s too early to rush to a conclusion on stimulus, as China’s finance ministry is yet to make any announcements on specific money boosters, she says.
Stimulus or not, though, the Chinese market is not for the faint-hearted. Volatility can rival, if not surpass, that of individual stocks.
Approach with caution, as the swings can be extreme. Stay sharp and strategic, and don’t get your fingers burnt. 🍜
