(Bloomberg) — Stock transactions in China fell to their lowest in more than four years as a rally in local bonds peaked in a weakening economy.
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Turnover on the Shanghai and Shenzhen stock exchanges fell to a total of 496 billion yuan ($69.1 billion) on Monday, the lowest since May 2020. It was also the lowest relative to China’s total market capitalization since late 2019.
As the world’s second-largest stock market posts losses for a fourth straight year, an unprecedented housing crisis has further limited investors’ options and triggered a surge in demand for government bonds that has alarmed regulators. While a sharp drop in trading volume is often a sign that pessimism has bottomed out, several such episodes in China in recent years have preceded panic-induced selling that pushed the market to new lows.
“The turnover shows that the market is full of pessimism,” said Shao Qifeng, chief investment officer at Ying An Asset Management Co., citing poor returns on stocks compared to bonds as the main reason. “But I think things are not as bad as they are currently perceived to be, and if possible, it is a no-brainer to add positions at this time.”
Shao said he remains optimistic about the earnings prospects of Chinese companies and the country’s long-term growth prospects.
China’s benchmark CSI 300 index has fallen by more than three percent this year, making it the worst performing of the world’s major stock indices. As of midday on Tuesday, it was down 0.2 percent, close to a 10 percent loss from its peak in May.
Meanwhile, trading volume in Hong Kong, where stocks have outperformed the mainland this year, has also fallen in recent days, falling to HK$70.3 billion (US$9 billion) on Monday, the lowest since February.
(Updated with information on investor prices and index performance)
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