Asia Minute: China’s Stock Market Uncertainty

Oct 23, 2018

Credit AhmadArdity / Pixabay

These are volatile times for China’s stock market. The first trading day of the week saw the biggest gains for the Shanghai Composite Index in more than two and a half years. On Tuesday, the market plunged. And over the past year, the market is still one of the worst performers in the world.

Even if you pay close attention to stock markets, the Chinese market is always a tough read. Many characteristics that investors like about publicly traded markets are totally absent here.

There’s not a lot of transparency, information is not universally shared, and the market’s not liquid — meaning that for foreign investors it’s not necessarily easy to get in and it’s not always easy to get out quickly. Plus, the last year has been pretty dismal — the Shanghai Composite is down more than 20-percent.

A quick comparative global shopping trip of the world’s stock markets finds Chinese returns among the worst in the world. Over the last 12 months, European stocks are down six to 11 percent. While in the U.S., the S&P 500 is up more than 7 percent.

The Asia Pacific has its share of bad performers, Korea’s KOSPI is down about 14-percent, the Philippines composite down about 13 percent. The main indices for Singapore, Hong Kong and Taiwan all down around 8 percent.

Credit Lorenzo Cafaro / Pexels

Indonesia, Malaysia, Thailand and Australia are all close to break even and the main measures for Japan and New Zealand are a little ahead.

Despite the short-term pop for the Shanghai index, prospects for the country’s economic growth remain uncertain; although in China government support often means a lot more than economic fundamentals.