Entreprise

Chinese market rallies disguise concerns about globalization

A turning point for veteran Asian investors at one of the world’s largest hedge funds last Thursday, after the day when US-listed Chinese stocks rose 33% and the Hang Seng Index recorded the largest one-day rise in history.

He said the size of the rally was welcomed and impressive, but the propellant was a pledge from the top of the Chinese Communist Party to introduce a series of “market-friendly policies” from other high levels. Government agencies that are immediate approval of it — had a big impact.

In his view, the left and right hands of China’s policymaking and market management seemed to work in harmony, indicating an important turnaround. He may be right, but the question is whether it is globally important. The economy is separated.

For optimists, Wednesday’s statement by President Xi Jinping’s closest economic adviser, Liu He, was encouraging. It meant that coordination was achieved between Xi Jinping’s “common prosperity” after the fierce clash between the state and the stock market last year. Recognizing that rhetoric and market trust are desirable and fragile at the same time.

Apparently, this accommodation is from Xi itself, with some approval that the protracted glow around the world’s second-largest stock market may have political value in these distressing times. Seems to have included.

Alibaba-led tech stocks are Liu’s due to the fact that China’s recent measures have hit the sector most painfully and the promise of an agreement between Beijing and Washington on the regulation of U.S.-listed Chinese. The strongest rebound on the market bailout list. Companies should more generally rate the juice.

JPMorgan Chase’s report was picked up last Monday, with China’s prominent Internet stocks downgraded to over 20, explaining that baskets are “unattractive and unsupported in the short term.” rice field. Another theory is that the prominence and negative tone of the report helped Beijing declare the floor sooner or later.

However, there are several factors that go against optimism about China’s move. JP Morgan’s memo emerged from a very rough patch of Chinese stocks. Along with the associated geopolitical turmoil, it meant that there were few visible brakes on the downward spiral. In that context, China’s move was no bigger change in thinking than the emergency circuit breakers triggered when policy makers reached their pain thresholds.

As traders pointed out, Thursday’s rally was driven by hedge fund and shortseller pressure. Foreign and domestic long-term only money has not yet made a definitive bet. In addition to that hesitation, there is a signal from Liu and financial stability. The development committee he chairs is almost completely silent from tech and other companies. Market rallies show the joy of someone who was told that their severe medical condition could be easily treated. The corporate reaction is more “stupid” I once “Grower.

But what is threatening on top of this is the dynamics that Beijing cannot change. Cramps that increase China’s self-confidence are rare, but not unprecedented. It is similar to a successful experiment after the global financial crisis and after the panic associated with domestic growth since 2014. Or the US trade war has taken hold.

But previously, feeling that globalization was still fundamentally unstoppable, decoupling boosted China’s confidence in what seemed to be a distant risk. Neither can now be said with confidence.

Even before the Ukrainian invasion raised concerns about globalization and decoupling, technology nationalism, supply chain redraws, and other megatrends were modifying calculations for investing in Chinese stocks. The international community has called on US President Joe Biden to “work for peace and tranquility,” and while seemingly calm, it is unlikely to change the underlying concerns about decoupling.

Beijing’s actions last week are important to neutralize some of the more peculiar concerns associated with domestic policies that are hitting specific sectors of the stock market, which is important for investors on the future of globalization of the Chinese market. Leave as a more direct representation of your view.

leo.lewis@ft.com

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