China’s slow recovery from the Covid pandemic could be a long-term hurdle for its stock market.
With the two largest indices of land — Shanghai Composite and Shenzhen Composite — Despite the negative signs for 2024, KraneShares Chief Investment Officer Brendan Ahern believes government stimulus is needed to boost domestic stock market performance.
“Investors, especially in mainland China… [are] are looking for much stronger financial support from the government,” he told CNBC.ETF Edge“this week. “So far, we’re still waiting.”
Ahern, whose company operates KraneShares CSI China Internet ETF (KWEB)added that Chinese households remain reluctant to spend at pre-pandemic levels. The latest reading from the country National Statistics Office showed retail sales of consumer goods fell slightly in June.
“That scar, combined with the real estate crisis in China, has really affected household balance sheets,” he said.
This week after earnings plunged in PDD Group is emblematic of the retreat of Chinese consumers, according to Ahern, who said parent company Temu has focused too much on growth amid a broader spending slowdown and fierce e-commerce competition.
“It’s a bit crowded and I think it’s paying the price for that at the moment,” he said. “The company’s growth has been phenomenal and that minor error leading to a big, big drop.”
Ahern returns to the idea that a top-down economic recovery may be necessary to stimulate China’s tech sector in particular.
“I think we need to see policy amplification and then we will see investors come back into the sector,” he added.
