SHANGHAI – Chinese investors are trading in and out of hot stocks at a record pace before the country’s annual parliamentary meetings, pointing to heightened market uncertainty around economic policies and leadership changes, analysts say.
Such wavering is unusual, they say, as shares typically rise before the National People’s Congress session on hopes of economic stimulus.
But this year’s congress, starting on Sunday, comes as investors worry about geopolitics, economic policy and regulation, as China makes its biggest government reshuffle in a decade and President Xi Jinping tightens his grip.
Money managers say they are waiting for evidence the economy is getting back on track as well as policy details from the congress. Rebounding corporate profits as China reopens from hard COVID-19 restrictions should boost the market in coming months, analysts say.
But for now, with benchmark indexes stalled, a gauge of the speed of sector rotation in China’s stock market is at a record high, brokerages say. This shows stock investors are directionless and gains not sustainable.
China’s CSI 300 benchmark stock index fell 2% last month after surging 15.6 percent over the previous three months on China’s dismantling of its zero-COVID policy.
The volatility implied by the prices of major equity options is low as investors refrain from big bets, and options pricing does not give clear signals whether investors expect shares to rise or fall, analysts said.
“Market participants haven’t formed a consensus. Thus gains in particular sectors or stocks might only last one or two days,” said Pang Xichun, research director at Nanjing RiskHunt Investment Management Co.
Full-time retail investor Lu Deyong has halted trading for a week after booking profits from a frenzy in trading artificial-intelligence shares on the success of Microsoft’s ChatGPT.
“I would rather take a rest and play online games when I cannot see a clear trend in the market,” he said.
Guidance from economic data is also delayed, as China tends to lump January and February numbers together to smooth out year-to-year differences in major holidays, and most companies report earnings only in March or April.
The risks around Taiwan and China-U.S. relations, as well as broader risk-taking as the Federal Reserve vows to keep rates higher for longer, have stalled foreign flows into mainland stocks and bonds.
China’s sectoral winners and losers have changed regularly in recent months, Everbright Securities said, challenging investors betting on short-term hot spots in the market.
Property and consumer shares led gains in November, soon after China dismantled some COVID restrictions, while growth stocks underperformed. The next month, property companies gave up some gains. In January, growth stocks such as new energy and computer companies outperformed, the brokerage said.