Share transactions in China have fallen to their lowest level in over four years, as a local bond rally intensifies amidst a faltering economy. On Monday, combined turnover on the Shanghai and Shenzhen stock exchanges dropped to 496 billion yuan ($69.1 billion), marking the lowest figure since May 2020 and the weakest relative to China’s market capitalization since late 2019.
The world’s second-largest stock market is poised for its fourth consecutive year of losses, exacerbated by an unprecedented housing crisis that has narrowed investor choices and driven up demand for government bonds, raising concerns among regulators. Historically, sharp declines in trading volume have often preceded market downturns driven by panic selling.
Shao Qifeng, Chief Investment Officer at Ying An Asset Management Co., commented, “The turnover reflects deep-seated pessimism in the market.” He attributed the sentiment to poor stock returns compared to bonds but suggested that the situation might not be as dire as current prices imply. Shao remains optimistic about Chinese corporate earnings and long-term growth prospects.
The CSI 300 Index, China’s benchmark, has dropped over 3% this year, making it the poorest performer among major global equity indices. It was down 0.2% at Tuesday’s midday break, approaching a 10% decline from its May peak.
In Hong Kong, where stock performance has been relatively better, trading volume also declined recently, falling to HK$70.3 billion ($9 billion) on Monday, the lowest since February.
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