China’s stock market turnover sinks to 4-year low as investors fret over stimulus

The daily turnover on China’s onshore markets has slumped to the lowest in four years, indicating investors are awaiting clearer signals on the policy front to support the economy, before risking more money on the table.

The combined value of shares changing hands on the Shanghai and Shenzhen exchanges slid to 472.9 billion yuan (US$66.1 billion) on Wednesday, the least since May 25, 2020, according to Bloomberg data. The turnover in Hong Kong shrank to a six-month low of HK$68 billion (US$8.7 billion), the data showed. The average daily turnover this year stands at 798 billion yuan and at 610 billion yuan for the month.

The subdued trading mirrors subsiding interest in Chinese stocks, as investors are underwhelmed by cuts to a policy loan rate and the loan prime rate following a Politburo meeting last month that highlighted the urgency of achieving the country’s economic growth target of around 5 per cent this year.

“Falling market turnover is a reflection of the slumping sentiment among investors,” said Song Yiwei, an analyst at Bohai Securities in Tianjin. “Whether the market will rise in the future depends on the scope of growth-stabilising policies and the pace of reforms.”

The slump in turnover has also coincided with the unwinding of leveraged stock purchases, a measure of market sentiment particularly among active traders. The outstanding value of stocks bought with borrowed money has hovered around a six-month low of 1.4 trillion yuan this week, according to Bloomberg data.

China’s economic data was mixed in July, with exports growing slightly slower than expected amid an uneven recovery in the world’s second-largest economy. Photo: AFP

The CSI 300 has dropped about 9 per cent from a high in May, as investors shift their focus to the progress on the recovery in economic growth and corporate earnings after the impact of state intervention, such as direct buying and a crackdown on market wrongdoing, faded. Traders have opted for bonds as havens against further economic slowdown, driving the yield on the benchmark 10-year government debt to a record low.

Meanwhile, a set of key official economic data for July showed that China’s uneven economic recovery continued, with industrial production trailing economists’ estimates and retail sales exceeding projections. Property investment, which is under close investor scrutiny, extended its slump to weigh on growth.

“China’s economic revival remains lopsided,” said Stephen Innes, managing director at SPI Asset Management in Bangkok. “Despite the government’s efforts to stimulate consumer activity and balance the recovery, July’s figures were underwhelming.”

China will probably roll out more measures to reduce housing inventory and prop up the property market as a way to bolster domestic consumption, as exports, a key growth driver in the first half, are set to soften, according to Patrick Pan, a strategist at Daiwa Securities Group.

For now, investors still need to brace for impact from lighter volumes, especially when they have to rely on fast-rotating thematic trades for profit against a backdrop of shaky economic fundamentals.

“There’s not a key theme out there the market can trade on for the long term,” said Wang Kai, an analyst at Guosen Securities in Shanghai. “The wealth effect is absent on the market.”

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