China’s slow recovery from the coronavirus pandemic could pose lasting headwinds for its stock market.
Owns two of the largest indices in the Mainland – Shanghai Composite Index and Shenzhen Composite Index — Every negative hit so far in 2024, KraneShares chief investment officer Brendan Ahern believes government stimulus is necessary to kick-start the country’s stock market performance.
“Investors, particularly in mainland China… are looking for stronger fiscal support from the government,” he told CNBC’s “ETF Edge” program this week. “So far, we’ve been waiting.”
Ahern’s company operates Kingsoft CSI China Internet ETF (KWEB)It added that Chinese households are still unwilling to maintain consumption at pre-epidemic levels. Most recently read country National Bureau of Statistics Data showed retail sales of consumer goods contracted slightly in June.
“This scar tissue and the housing crisis in China are really putting pressure on household balance sheets,” he said.
Earnings plunge this week Pinduoduo Holdings Ahern said this was emblematic of shrinking Chinese consumers. He believes the Temu parent company is too focused on growth amid a broader spending slump and fierce e-commerce competition.
“It’s a little crowded, but I think it’s worth it for now,” he said. “The company’s rapid growth and minor missteps resulted in a significant decline.”
Ahern returned to the idea that a top-down economic recovery may be necessary to stimulate China’s tech industry.
“I think you need to see policy amplification, and then you’ll see investors re-entering the space,” he added.
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