China’s slow 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 negative so far in 2024, KraneShares Chief Investment Officer Brendan Ahern thinks government stimulus is necessary to kick-start the country’s stock market performance.
“Investors, particularly in mainland China … [are] looking for much, much stronger fiscal support from the government,” he told CNBC’s “ETF Edge” this week. “Thus far, we’ve been left waiting.”
Ahern, whose firm runs the KraneShares CSI China Internet ETF (KWEB), added that Chinese households are still reluctant to spend at pre-pandemic levels. The most recent read from the country’s National Bureau of Statistics showed consumer goods retail sales contracting slightly in June.
“That scar tissue, as well as a real estate crisis in China, has really weighed on the balance sheet of the household,” he said.
This week’s post-earnings plunge in PDD Holdings is emblematic of China’s consumer pullback, according to Ahern. He suggests the Temu parent company has focused too heavily on growth amid a broader spending slump and stiff 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 slight miss lead to a big, big drop.”
Ahern returned to the idea that a top-down economic recovery might be necessary to stimulate China’s tech sector in particular.
“I think you need to see policy amplification, and then you’ll see investors come back into this space,” he added.
