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Running Dry: Is the Chinese Stimulus Spigot About to be Turned Off?

Apr 23, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • Running dry may be a bit of an overstatement, OK, but recent signals from Chinese officicials are being read as a sign of less stimulus ahead, according to Bloomberg
  • China's CSI 300 has been the best performing stock market, rising almost 40% this year; any sense of an end to the stimulus party weighs heavy on market sentiment there
  • Traders are reading a statement from the Politburo meeting on Friday as signalling government officials see the economy as stable and in less need of stimulus
  • The statement had a notable focus on deleveraging and the avoidance of speculation in the housing market
 
 
CSI 300
 
 
  • The news of the Politburo statement sent the CSI 300 2.3% lower Monday and a further 0.2% lower overnight
  • Property stocks were especially negatively affected by the news
  • These signals from officials follow the Central Bank's rolling over of only half of the amount recently when renewing one of its longer-term policy tools
  • Officials' concerns over asset bubbles are being made clear leading many to question the next moves for the market
  • China added $2.5 trillion in market cap since the low late last year with half the companies in the CSI 300 rising over 50% since then; momentum does not seem very strong
  • No one expects stimulus to end, it should be noted, but curtailed from its present generous levels
  • A successful end to US-China trade negotiations would surely be positive for Chinese stocks and improve sentiment and could potentially offset the need for heightened stimulus
 
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Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS