'Investing in Communism Never Pays' — China's Proposed $278 Billion Rescue Stimulus Risks Falling Flat, Fears Abound of Continued Social Unrest
Portfolio Pulse from Caleb Naysmith
China's proposed $278 billion stimulus to rescue its markets may not be effective, with fears of social unrest and a comparison to the US 2008 recession. The iShares MSCI China ETF (MCHI) is down 4% this year and 37% since inception. Alibaba (BABA) lost 38% in value over the past year. CITIC Securities restricted short selling, and China plans to inject funds into markets via Hong Kong. China's debt-to-GDP ratio hit a record 286%, and there's skepticism about the stimulus' effectiveness and concerns about global contagion risks.
January 29, 2024 | 5:00 pm
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NEGATIVE IMPACT
Alibaba Group Holding Ltd. (BABA) has lost about 38% of its value in the past year, and the current market conditions in China do not bode well for its short-term recovery.
Alibaba's stock performance is closely tied to the Chinese economy, and the proposed stimulus, which may not be effective, could continue to negatively impact investor sentiment towards BABA.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
The iShares MSCI China ETF (MCHI) is down 4% this year and 37% since its inception, reflecting ongoing challenges in the Chinese market.
Given the negative sentiment surrounding China's market and the recent performance of MCHI, the proposed stimulus, which is viewed skeptically, is likely to have a limited positive impact on the ETF in the short term.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90