China’s stock market has been performing poorly in the first nine months of this year as its officials have been busy preparing for the Chinese Communist Party’s 20th National Congress.
According to the Central News Agency, numerous reasons have shaken the mainland equity market this year.
The major players are the COVID-19 outbreak, the regulatory crackdowns on technology and real estate sectors, and the strained relations between China and Western countries, coupled with the acceleration of interest rate hikes in the United States.
As a result, China has seen its shares fall dramatically at home and abroad.
Three major A-share indexes dropped sharply in the third quarter of 2022 alone. The Shanghai Composite Index was down 11.01%, the Shenzhen Component Index was down 16.42%, and the ChiNext Index was down 18.56%.
The decline looks even more tragic if the timeline is extended to the first nine months. The Shanghai Composite Index slid 16.91%, the Shenzhen Component Index plummeted 27.45%, and the ChiNext Index plunged 31.11%.
The market capitalization of A-shares has evaporated trillions of dollars in the first three quarters.
According to Tonglian Datayes statistics, the total market value of A-shares was 99.1 trillion yuan on December 31, 2021, but fell to 84.67 trillion yuan on September 30, 2022.
That means the total market value of A-shares evaporated about 14.4 trillion yuan, or more than $2 trillion, so far this year.
Wang Jing is the director of the investment management department of China Merchants Fund. She said that the interest rate hikes by the U.S. Federal Reserve and the Russia-Ukraine war had adverse impacts on various countries’ stock markets, including China’s A-shares.
Inside China, the country’s internal economy was affected by the COVID-19 pandemic reemerged in major cities such as Shanghai and Shenzhen. The stock market was under the triple pressure of supply shock, weak expectations, and contraction of demand.
The plummet of China’s stocks helped boost the attractiveness of its biggest rival: the Indian stock market.
Liberty Times reported that the MSCI China index fell 23% in the third quarter, while the MSCI India index rose 10%. The gap of 33 percentage points is the largest gap between the two countries since March 2000.
Regarding the outlook for the fourth quarter, Mao Wei—chief investment officer at Southern Fund—said that a significant improvement in China’s economic fundamentals is still small.