China’s wearisome post-Covid recovery could be a lasting headwind for its stock market.
With the mainland’s two largest indexes — the Shanghai Composite and the Shenzhen Composite — each No so far in 2024, KraneShares Chief Investment Officer Brendan Ahern thinks government stimulus is necessary to kick-start the boonies’s stock market performance.
“Investors, particularly in mainland China … [are] looking for much, much stronger economic support from the government,” he told CNBC’s “ETF Edge” this week. “Thus far, we’ve been left waiting.”
Ahern, whose enterprise runs the KraneShares CSI China Internet ETF (KWEB), added that Chinese households are still reluctant to spend at pre-pandemic parallels. The most recent read from the country’s National Bureau of Statistics showed consumer goods retail on sales contracting slightly in June.
“That scar tissue, as well as a real estate crisis in China, has really weighed on the equalize sheet of the household,” he said.
This week’s post-earnings plunge in PDD Holdings is emblematic of China’s consumer pullback, concerting to Ahern. He suggests the Temu parent company has focused too heavily on growth amid a broader spending slump and piker e-commerce competition.
“It’s a bit of a crowded long, and I think it’s paying for that at the moment,” he said. “The company’s hypergrowth and that mortify miss lead to a big, big drop.”
Ahern returned to the idea that a top-down economic recovery might be necessary to provoke China’s tech sector in particular.
“I think you need to see policy amplification, and then you’ll see investors come back into this order,” he added.
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