Domestic and External Pressures: China s Stock Market Struggles Amid Short-Lived Gains

China's Stock Market Disappoints! A Crash Similar to 2015 May Be Looming! (Video Screenshot)

[People News] Following the introduction of a series of economic stimulus policies by Beijing in September, China's stock market and Hong Kong stocks experienced a wave of investment enthusiasm. This attracted savings from domestic citizens, leading to record-breaking growth in stock prices. However, according to Reuters, the lack of a clear large-scale spending plan from the CCP, combined with the geopolitical uncertainties brought by Donald Trump’s impending presidency in the United States, has begun to cool the frenzy. Large investors are increasingly opting to cash out quickly rather than wait for a long-term recovery in industries.

According to Radio Free Asia, the Shanghai Composite Index’s average daily trading volume over the past two months has been 2.5 times its 10-year average. Retail investors primarily directed their funds into the market’s most speculative sectors, such as technology stocks. They believe these industries, under Beijing’s protection, will not face restrictions from the U.S. Experts analyzed that the current inflow of funds is largely speculative and driven by retail investors who are not focused on market fundamentals.

However, the report also highlights a stark contrast: a significant outflow of foreign capital. Despite the CCP no longer releasing real-time data on capital movements, investment bank Goldman Sachs estimates that approximately $16.9 billion in foreign capital has left China over the past four weeks. This is largely attributed to investors avoiding market volatility and potential tariff risks. Foreign investors are currently watching to see if Beijing will introduce new stimulus measures. As U.S.-China tensions escalate, there is speculation that the Chinese market may shift toward self-reliance, impacting stock price volatility.

An asset management expert told The Wall Street Journal that the Chinese market currently faces too much uncertainty, and investors need Beijing to quickly roll out larger-scale stimulus measures to boost confidence. The expert also noted that without clear results from stimulus plans, stock markets in Hong Kong and China could see corrections in the near term. Until the situation becomes clearer, investors are advised to focus on Chinese companies with strong domestic demand and minimal reliance on exports.