China’s outlook is ‘worse than economists estimated’
China’s economic outlook could be “worse than economists estimated”, Ashcourt Rowan said last week, after Chinese stockmarkets hit multi-year lows last month.
In an August market update, the wealth manager said Chinese stockmarkets had fallen because authorities were determined to control ballooning property prices in the country and, as a result, hold off on loosening monetary policy.
The price of stocks in the MSCI China A index of locally listed Chinese A shares is now at its lowest point since March 2009, when developed world stockmarkets bottomed after the collapse of Lehman Brothers, according to FE Analytics.
Investors have long feared a “hard landing” in China followed concerted efforts by policymakers to prick the nation’s property bubble.
Growth in Asia’s largest economy has continued to lose traction in recent months, in spite of a strong equity rally in developed economies as the eurozone debt crisis has appeared to ease.
However, Ashcourt Rowan’s update pointed out that according to China’s National Bureau of Statistics, new home prices were still rising in 49 of China’s 70 major cities in July, making radical economic stimulus less likely.
“Investors are obviously nervous about the true state of the Chinese economy. Like their Western counterparts, the reliance seems to be on further monetary stimulus of some kind or other happening,” Ashcourt Rowan said.
The firm warned that traders charging the biggest premium since March to protect against losses in Chinese companies could be a sign that a slowdown in the world’s second-largest economy is “worse than economists estimated”.