The problems keep piling up in China. Weakening demographics, as her population shrank for a second consecutive year. Weak consumer spending. A record property downturn. Rising trade tensions.
The drip-drip-drip of these glitches culminated in a massive stock market wipeout as over US$6 trillion has been wiped from the combined capitalization of the Chinese and Hong Kong markets since the 2021 market peak. As an illustration of the depth of the carnage, the Hang Seng Index fell to test levels seen at the 1997 handover to China. Beijing responded with a plan to order State Owned Enterprises to use its offshore currency reserves, which is estimated to be 2-trillion yuan, or US$278 billion, to buy Chinese stocks to prop up the market. In addition, the PBoC announced a half-point cut to the required reserve ratio on February 5 to provide greater liquidity to the financial system.
For investors, the key question is what’s the effect of skidding stock prices in China and nearby Hong Kong on the rest of the world?
The full post can be found here.
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