Has China lost $6 trillion in the stock market?
What's that done to their valuations? The CSI 300 Index has fallen more than 40% from its 2021 peak while the Hang Seng China Enterprises Index has lost over 50%. In all, roughly $6.3 trillion has been wiped out from the market value of Chinese and Hong Kong stocks since their highs.
China and Hong Kong stocks lost nearly $5 trillion in 3 years — more than India's market cap. Stocks in China and Hong Kong sold off a massive $4.8 trillion in market capitalization since 2021, which according to HSBC, is more than the value of the Indian stock market.
Chinese shares haven't just had a bad start to 2024. It's been rough going since February 2021, when they hit their most recent peak. Over the past three years, about $6 trillion — equivalent to roughly twice Britain's annual economic output — has been wiped off the value of Chinese and Hong Kong stocks.
China's well-documented economic struggles have led to broad declines in its stock markets over the past year, as growth was weighed down by a slump in real estate and exports. The Chinese government is targeting 5% growth in 2024, having notched 5.2% in 2023.
Chinese Stocks Have Lagged the World
There are many reasons for this: the coronavirus pandemic and subsequent shutdowns, the collapse of the real estate sector, the burden of debt, geopolitical tensions with Taiwan and the United States, the export crisis and the flight of foreign capital.
China's economic troubles, briefly explained
Real estate now accounts for about a quarter of China's GDP. The country, though, couldn't support that level of expansion, with a per capita income that is still low compared to other advanced economies. Major property developers such as Evergrande have gone bankrupt.
The largest single-day percentage declines for the S&P 500 and Dow Jones Industrial Average both occurred on Oct. 19, 1987 with the S&P 500 falling by 20.5 percent and the Dow falling by 22.6 percent. Two of the four largest percentage declines for the Dow occurred on consecutive days — Oct. 28 and 29 in 1929.
Major Chinese stock benchmarks have staged a strong comeback from their lows earlier in the year, also buoyed by a return of foreign fund inflows amid Beijing's resolve to end a rout of about $7 trillion.
1. Apple (AAPL) Apple designs and makes a variety of consumer tech products and has one of the best known brands in the world. Apple generated more than $200 billion in iPhone sales during its fiscal 2023 and total sales reached $383 billion.
| China Stock Exchanges | ||
|---|---|---|
| SSE | HKG | |
| Market Capitalization | $6.52 trillion | $3.97 trillion |
| Number of Listed Companies | 2,263 | 2,609 |
| Electronic Order Book Value of Share Trading | $971.79 billion | $164.73 billion |
Is China still a good investment?
More recently though, growth rates have slowed, and China's stock markets have reflected this in no uncertain terms. The CSI 300 – which includes the top 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges – has fallen around 40% since its peak in 2021.
Domestic demand in China has remained sluggish and contributed to low inflation, while the policy space for stimulus is constrained. Weak business confidence, in part driven by the property market downturn, continues to weigh on growth. Over the medium term, China's economy is expected to undergo a structural slowdown.
- Tencent TCEHY.
- Yum China YUMC.
- Baidu BIDU.
- JD.com JD.
- Alibaba BABA.
China is in the midst of a profound economic crisis. Growth rates are flagging as an unsustainable mountain of debt piles up; China's debt-to-GDP ratio reached a record 288% in 2023.
Investors are Bearish on the Chinese Market
Every index tracking China share prices had a terrible 2023, with the declines continuing through last month. That includes indexes in China's markets, Hong Kong, and those tracking Chinese companies on Wall Street.
Challenges multiply after the country's years of rapid growth. China's economy is at a turning point. An old economic model underpinned by heavy investment in infrastructure and real estate is crumbling. Growth is slowing and prices are falling, raising the specter of a Japan-style slide into stagnation.
China's economy has reached an important crossroads Why China needs to transition its economy: growth drivers of the past are fading Economic reform and opening up Increased use of leverage Out with the old, in with the new?
That estimate might be a bit much, but 1.4 billion people probably can't fill them,” He told the Dongguan audience. Previous estimates have ranged from 65 million to 80 million vacant housing units in China. He's remarks suggest even these numbers are an underestimate.
BEIJING -- China on Tuesday set a gross domestic product growth target of "around 5%" for 2024, matching last year's goal even as economic challenges mount.
And the shocking leader of the bunch? President Calvin Coolidge, who took office in 1923, whose stock price performance change was a whopping 208.52%, for an average monthly return of 1.74%. That's the largest for any president since the start of the 20th century.
Why do 90% of people lose money in the stock market?
Staggering data reveals 90% of retail investors underperform the broader market. Lack of patience and undisciplined trading behaviors cause most losses. Insufficient market knowledge and overconfidence lead to costly mistakes. Tips from famous investors on how to achieve long-term success.
Real-World Example of a Stock Losing All Its Value
Sometimes a company will be forced into bankruptcy and its stock fall to zero as the result of an accounting scandal or fraud. Take the famous case of Enron, a large and influential energy and trading company in the 1990s.
| Period | Average annualised return | Total return |
|---|---|---|
| Last year | -16.4% | -16.4% |
| Last 5 years | -5.5% | -24.5% |
| Last 10 years | 3.9% | 46.9% |
| Last 20 years | 7.3% | 312.7% |
| 5 Day | 0.76% |
|---|---|
| 1 Month | 1.56% |
| 3 Month | 6.13% |
| YTD | 3.82% |
| 1 Year | -7.06% |
Indeed, Chinese stocks have whipsawed in recent months amid signs of support from Beijing to boost the economy and prop up the stock market—with many measures so far doing little to significantly boost investor confidence.
