While Asian Stock Markets Soar, China’s Stock Market Suffers Losses

A Hong Kong resident walks past an electronic display board showing the Hang Seng Index, on June 14, 2023. Bill Cox/The Epoch Times

Stock markets of several Asian countries, including Japan, South Korea, Vietnam, and India, have surged, some reaching highs that have not been seen in years. However, the Chinese stock market has faced significant challenges, struggling to escape a bear market. Financial analysts suggest that this declining performance reflects investors’ attitudes towards the future economic outlook of each country or region, with China’s economic prospects being viewed pessimistically. Meanwhile, other Asian countries are benefiting from the shifting of China’s industrial supply chain.

A number of Asian markets outside of China are flourishing with Japan leading the way. On June 13, the Nikkei 225 index made a significant breakthrough, surpassing the 33,000-point mark for the first time since 1990. By the end of the trading day, the Nikkei 225 index had risen by 1.88 percent, closing at 33,042.5 points.

Among the stocks listed on the Nikkei 225 index on that day, 170 companies experienced an increase, while 54 companies faced a decline. Leading sectors included export-related stocks, particularly semiconductor and automobile stocks. Companies like Advantest and Tokyo Electron witnessed an increase of nearly 5 percent in their stock prices, while Toyota’s stock price also saw a significant rise, reaching a growth rate of 5.05 percent.

Several Japanese trading companies, in which renowned investor Warren E. Buffett has invested, reached new record highs on June 13. Mitsui & Co Ltd experienced the highest increase, reaching 2.2 percent, while Mitsubishi Corporation, Itochu, and Sumitomo Corporation also achieved gains. Since Buffett revealed his increased holdings of the top five Japanese trading companies in April this year, with plans to further invest in Japanese stocks, the stock prices of these companies have consistently reached new historical records.

With the growing interest of foreign investors, the Nikkei 225 index is currently rising quickly, accumulating a growth rate of over 23 percent year-to-date.

South Korea is another market that has garnered attention. Although the KOSPI (Korea Composite Stock Price Index) did not set a record high on June 13, it briefly reached a point higher than any in over a year on the previous trading day. Korean technology stocks, accounting for approximately half of the KOSPI, have played a significant role in UBS Global Wealth Management’s industry and market dominance. The KOSPI has achieved an 18 percent increase year-to-date, with very few rivals in Asia apart from the Japanese stock market.

Amidst the surge in the Japanese and South Korean stock markets, the previously less prominent Vietnamese stock market has begun to quietly gain momentum.

The Ho Chi Minh Stock Index in Vietnam has accumulated a growth rate of over 20 percent compared to its low point in November of last year. Like the S&P 500 and the KOSPI, it has recently entered a technical bull market. On June 13, the Ho Chi Minh Stock Index further increased by nearly 0.6 percent, reaching its highest closing level in eight months. Vietnam’s loose monetary policy and government economic stimulus measures are enhancing the outlook for the country’s stock market.

In recent months, India has also regained the spotlight. The Nifty 50 index has risen by nearly 7 percent this quarter, recovering all the losses incurred since March.

The bull markets in these Asian countries stand in stark contrast to the downturn witnessed in the Chinese stock market. The benchmark Shanghai Shenzhen 300 index has experienced a 5.29 percent decline this quarter, erasing all the gains made earlier this year.

According to data from Refinitiv, a global financial market data provider, the Hang Seng Index in Hong Kong also entered bear market territory last month, recording a nearly 2 percent decline year-to-date.

On June 10, Bloomberg reported that the Chinese stock market suffered a loss of $1.5 trillion in market value. Strategy analysts from Goldman Sachs, Nomura Holdings, and Morgan Stanley have revised their targets down for the MSCI China Index by at least 11 percent at different times. Their latest forecasts indicate that although the index may see a rebound from its current level, reaching the high point set in January will be a challenge.

Bloomberg also stated that at its most severe decline, the MSCI China Index has fallen nearly 20 percent from its peak on January 27, resulting in a loss of approximately $1.5 trillion.

Analysis: The Stock Market Reflects Investors’ Attitudes

On June 15, Lu Yuanxing, a Chinese American political and economic analyst with prior experience as a senior executive in a Chinese company’s marketing department, shared insights in an interview with The Epoch Times reporters. He highlighted that the performance of the stock market reflects investors’ outlook on the future economy of a country or region.

Lu expressed that the current performance of the Chinese stock market reflects both international and domestic investors’ pessimistic attitudes toward China’s economic status and prospects. He emphasized, “China’s political environment is increasingly unfavorable, with an escalating level of authoritarian control by the Chinese Communist Party (CCP). Political dictatorship inevitably impacts the economic sphere, leading to significant effects on China’s overall economic environment.”

Furthermore, he added, “The international community is becoming increasingly aware of the threat posed by the CCP to global security. Consequently, industrial supply chains are undergoing substantial shifts to other regions. These shifts also entail capital relocation, which greatly impacts China’s job market and leads to a continuous rise in unemployment rates.”

Lu emphasized that for the stock market to experience an upward trend, it requires support from capital. However, currently, foreign capital is continuously flowing out of China, and northbound funds through Hong Kong are decreasing. Within mainland China, numerous listed companies’ shareholders have been reducing their holdings and cashing out, taking advantage of various opportunities to sell stocks.

“The outflow of capital occurs as shareholders cash out, resulting in a lack of liquidity in the stock market,” Lu explained. “The reduction in holdings by major shareholders triggers a chain reaction that significantly affects investor confidence. As a result, capital will continue to be drained from the stock market, leading to its decline. Additionally, under increasing control by the CCP, Hong Kong’s freedom has been diminishing. As an international financial center, the diminishing freedom naturally instills a pessimistic view of Hong Kong’s future, prompting the withdrawal of funds. Overall, this reflects the sentiment of both domestic and foreign investors regarding the dim outlook of China’s economy.”

Lu also highlighted that countries like Vietnam and other Asian nations directly benefit from the relocation of China’s industrial supply chains. “The shift of industrial supply chains to Southeast Asian countries, such as Vietnam, India, and Thailand, where labor costs are relatively cheaper, attracts a significant influx of capital. As a result, the external outlook for their economies appears highly favorable.”

Lu believes that Asian countries like Japan and South Korea, which have formed an alliance with the United States and aligned themselves against the CCP, have vast development prospects in the future. “Therefore, investors hold an optimistic attitude towards them, resulting in a significant contrast between the Chinese stock market and the rest of the Asian countries.”