Chinese stocks went down on Friday, following a general dip in Asian markets. This happened because traders reduced their expectations for cuts in U.S. interest rates due to unclear inflation signals, and also because of a decline in China’s trade activities in March, which affected market mood negatively.
Denting investor appetite for riskier assets, the dollar hovered near a five-month high alongside U.S. Treasury yields in the wake of hotter-than-expected March consumer price data. Meanwhile, data on Thursday showed U.S. producer prices increased only moderately.
Customs data released on Friday revealed that China’s exports fell significantly in March, and imports also decreased unexpectedly, missing market expectations by a large margin. This underscores the challenging job that policymakers face as they attempt to support a fragile economic recovery.
Global brokerage Morgan Stanley advised investors against buying the global dip in Chinese stocks, warning that foreign funds may keep selling unless there is further policy easing. Morgan Stanley noted that the outflow of $22.1 billion from Aug 7 to Oct 19 is the biggest outflow in Stock Connect’s history (which refers to trading links between China and Hong Kong).
“Global funds have been dumping Chinese shares,” it said “amid rising geopolitical tensions, economic headwinds and a housing crisis. Efforts by President Xi Jinping’s government to stabilize the property sector and avert deflation have shown little effect.”
It also noted that foreign investors are on track for a third straight month of selling stocks in Shanghai and Shenzhen — the longest streak — after recording the single biggest outflow in two months on Thursday. Foreign investors are now less than $9.6 billion away from making 2023 the first year they sell Chinese shares on a net basis since trading links opened in 2016.
