Recent activity in China is having global effects, the CEO of Sun Global Investments said.
Earlier this week global stocks retreated following Chinese equity declines over three consecutive sessions that saw CSI 300 of Shanghai and Shenzhen listed companies close 3.5 per cent lower while Hong Kong’s Hang Seng closed 4.2 per cent lower. The FTSE fellow below 7,000, while and and the DAX both dropped one per cent.
“Global investors sold $2 billion of Chinese stocks yesterday, the largest volume of foreign selling in a year, as investors were rattled by China’s swift regulatory move over the weekend to ban academic tuition groups from making profits, raising capital or going public,” Sun Global Investments CEO Mihir Kapadia said. “Concerns indicate the hidden risk faced by business in the world’s second biggest economy”
Kapadia said domestic and international concerns are clear, given the losses occurred as the economy expanded by 3.2 per cent over the three months ending in June.
“This beat analyst expectations of 2.5 per cent growth – prompting concerns the rebound this year was engineered by state support, which is not expected to continue,” Kapadia said. “There is a strong consensus that the headline growth numbers were boosted by state dominated and supported heavy industries – as the jump in GDP has not reflected in the Chinese retail data, which declined for a fifth straight month. In the coming months, analysts will be looking out for signs of the previous state supported industrial output resulting in any consumer sentiment as that would be an organic transition. Further state intervention may be deemed plausible if organic growth falters.”