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Insights - Chinese assets, which surged recently on hopes for stronger fiscal stimulus, saw a sharp reversal as market sentiment shifted. On Wednesday, mainland Chinese stocks plunged, with major indices dropping 4%.
As of 2 PM on October 9, the Shanghai Composite fell 4.78% to 3,322.97 points, and the Shenzhen Component dropped 5.34% to 10,8881.74 points. The ChiNext Index plummeted 6.37% to 2,387.90 points.
Chinese stocks listed in the U.S. also saw sharp declines, with the Nasdaq Golden Dragon China Index dropping 7% on October 8. Alibaba fell 6.67%, JD.com 7.52%, NetEase 5.14%, and Baidu 7.39%. Li Auto dropped 8.10%, and XPeng Motors fell 7.26%.
The downturn is attributed to doubts over the impact of China’s expected stimulus, and weaker-than-expected holiday spending data. Investors were disappointed by a press conference that introduced no major new measures, dampening hopes for a stimulus-driven rebound.
Holiday travel rose 10.2% compared to 2019, but spending only increased by 7.9%, signaling weak consumer demand.
Yi Wang of CSOP Asset Management noted, "The market is grappling with the gap between stimulus expectations and economic reality." RBC’s Alvin Tan remarked that the recent optimism surrounding Chinese assets was largely based on expectations of substantial fiscal policy plans. "If we don’t see measures at least in the range of RMB 2 to 3 trillion, in line with expectations, sentiment could shift rapidly," Tan warned.
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