The CSI 300 index, which tracks 300 of the largest stocks in Shanghai and Shenzhen, has fallen 20% from its peak in June, marking a prolonged sell-off that has lasted for 10 consecutive weeks. This week alone, the index is down 2.6%, indicating persistent pressure on Chinese equities.
Jordan Cvetanovski, chairman and CIO at Pella Funds, highlighted that China's equity market is facing structural challenges, particularly due to the repercussions of overcapacity and overinvestment from previous years. He noted that the country is struggling to address these issues, which are affecting even competitive sectors like batteries, although he still sees some opportunities there.
Additionally, Chinese companies are experiencing declining profit growth amid fierce competition, which has led to government intervention.
The latest data shows that September marked the weakest growth in industrial profits this year, and the economy has recorded its slowest growth in over three years during the second quarter, largely due to a prolonged downturn in the property sector and weak consumer demand