Is the worst over for the Chinese equities market?
Judging from the recent decline in the amount of mainland shares sold by foreign investors and the gains in the Shanghai Composite Index, that maybe the case. At least for now.
After reaching a record high on July 6, net sales of Chinese shares by offshore investors through the Shanghai-Hong Kong Stock Connect eased, according to data from the Hong Kong Exchanges website.
From 13.523 billion yuan ($2.2 billion) Monday, net sales consistently fell in the succeeding days to Thursday, even if total turnover has also fallen. But the drop in net sales has been steeper versus the decline in total transactions (buy and sale). Net sales fell 72% Thursday from Monday’s record high, while total turnover dropped 53.4%.
The decline in net sales coincided with the recovery in the Shanghai Composite Index, which closed 5.8% higher Thursday, after the Chinese government announced a fresh set of measures to boost the stock market, which has fallen more than 30% since its June 12, seven-year high peak.
The Shanghai index is trading up 5.9% mid-morning Friday, and Bloomberg said it is headed for its biggest two-day gain since 2008.
With the recovering stock market, Fidelity Investments believe Chinese shares are a “buy” after the downturn. Fidelity joins Goldman Sachs’ optimism about the mainland market, according to Bloomberg.
“As far as the fundamentals are concerned, we are actually quite confident,” Bloomberg quoted Robert Bao, a Hong Kong-based money manager at Fidelity, which oversees more than $2 trillion globally, as saying in an interview with the news outlet. “We are fully invested.”
Photo credit: Aaron Goodman via Flickr