HSI in a bear market territoryFrom the peak at 22,792 in mid February this year, we are now seeing HSI entering into a bear market territory currently. Some said that the selling has been excessive and possibly a rebound is near the corner due to sellers' exhaustion.
Effective Sept 4 this year, we will see Country Garden being deleted from the HSI after missing payments on its bonds.
Since the epic of Evergrande declaring bankruptcy and shaken the world quite a bit, the Chinese government has been releasing "assuring words' of calming the economy and promised to shore up with stimulus packages. Here's the latest
The market is irrational and thus low prices can get lower and there will be investors who are afraid to catch a falling knife while some contrarians may view this as a good risk/reward ratio due to its excessive pessimistic view that many have on China market. Who's right and who's wrong? Only time will tell.
This property crisis has major consequences on consumers confidence. As I have mentioned before, majority of the Chinese place their savings/live savings on property as a major source of investments. This crisis will lead to them not wanting to pay up for their mortgages less to talk up buying new properties. This will affects the banks in China which are mainly state owned.
Plus, not announcing the updates on the youth unemployment only adds more anxiety to the people rather than eliminate their fear. When things are murky and uncertain, common sense will be to tighten your purse string and buy only the necessity and not spend on the want list.
With the continuous pressure coming from US on its tariffs and stringent trade policies, declining imports and exports, how can China then turn its attention towards building domestic market? Thus, I still hold the opinion that the CCP is still adopting a wait and see approach, releasing its piecemeal stimulus package to test the market.
Let's see how the market turns out later this week.
