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President Xi Jinping plans to resume China’s “panda diplomacy” with the US. He has promised new pandas for American zoos. These cuddly trying bears might seem to assuage Sino-US overseas relations. However that won’t assist traders fretting over Chinese language shares buying and selling at traditionally low valuations.
Biden mentioned the assembly with Xi within the US yielded progress. Xi claims China is able to be a companion and pal of the US. They agreed to renew army communications after a number of years of stress over a potential Taiwan battle.
Markets ought to concentrate on what was left unsaid. There was no dialogue on US curbs on superior chip gross sales, US investments in Chinese language expertise and the disputed areas of the South China Sea. Final month, the US additional tightened a sweeping set of chip export controls applied in 2022. In August, Washington mentioned it could restrict US investments in superior Chinese language expertise.
Worse, in response to a query at his post-summit press convention, Biden referred to Xi as a “dictator”. This sparked an indignant response from the Chinese language overseas ministry on Thursday, inflaming current tensions.
Beneficial properties in Hong Kong and mainland listed Chinese language shares within the lead as much as the summit anticipated an enchancment in US-China relations. That now appears to be like overly optimistic. Chinese language shares had been among the many worst performing in Asia on Thursday, led by tech and electronics shares together with Lenovo, Alibaba and Xiaomi. The latter fell 7 per cent.
All this comes when Chinese language shares look traditionally low-cost. Shanghai’s Composite Inventory Index trades at simply 1.2 instances its estimated guide worth. That could be a low cost to most of its regional friends and close to the underside of its 10-year vary. The identical holds true for the index’s ahead worth/earnings ratio at underneath 10 instances.
However the market is reasonable for a motive. Backside-fishing traders in search of bargains fear most concerning the native property sector. On Thursday, October knowledge on house costs fell essentially the most in eight years. The actual property disaster is getting worse, confirming that Beijing’s financial easing measures have little energy to enhance the scenario. Actual property shares, even these of the most secure builders corresponding to China Vanke, have plummeted in latest weeks.
The latest rally in Chinese language shares ought to falter. No variety of cute pandas can offset the asset deflation threatening the property sector.
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