Sep 25, 2023

US stocks dragged down last week’s global stock index, but Friday’s rebound in Chinese stocks is likely to persist.

CH50 Daily Chart

CH50 daily chart

The CH50 index rebounded to 12680 and may have a chance to move higher earlier in the week.

US stocks Hit hard by the Federal Reserve’s continued hawkish policies, stocks are likely to rebound this week amid calm data markets. The US is due to release GDP data this week, but traders may think the recent decline is overdone.

China’s economic activity looked better in August, but there is still some weakness in the real estate sector. Industrial production, which measures the performance of industries such as manufacturing and mining, rose 4.5% in August from a year earlier, according to the National Bureau of Statistics.

Retail sales also rose 4.6% from a year earlier, compared with just 2.5% in July.

In the real estate sector, however, major government-backed real estate developer Sino-Ocean Group said it would suspend repayments on its overseas borrowings, another sign of the ongoing housing crisis. According to the National Bureau of Statistics, real estate investment data fell by 8.8% year-on-year in the first eight months of this year.

Larry Hu, chief China economist at Macquarie Group, said that despite “general pessimism”, the worst may be over for China. China has been hit by weak export demand and its worst-ever property slump amid a global economic slowdown.

“Going forward, overall growth data may improve due to policy support and base effects, but the pace of growth will be moderate,” he said, citing weakness in the real estate sector and low confidence among business owners and consumers.

The Chinese government has been criticised for cutting interest rates modestly by 0.10% to stimulate the economy, but this may be a sign that things are not as bad as they seem. If the real estate sector is further affected, China’s central bank has more stimulus tools at its disposal. The situation seems to be under control now.

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