The global equities market continued its bullish streak in January 2024, marking its third consecutive month of positive performance. There was however a strong divergence between developed and emerging markets, with developed markets up by +3.0% and emerging markets declining by -3.0%, largely as a result of Chinese equities falling by -10.0% (in US Dollar terms).
The Chinese stock market has been struggling for the past three years, with about $6 trillion wiped off the value of Chinese and Hong Kong stocks since February 2021. China, the world’s second largest economy, has struggling with record downturn in its real estate market, which, coupled with the scars left by government’s COVID policies, has knocked the confidence of the Chinese consumer. However, there are signs that the Chinese government is beginning to worry and is taking measures to support its economy and financial markets. The measures are likely to stabilize stock market sentiment and could potentially even support a relief rally in China stocks, given extremely low valuations, very light investor positioning, and technically oversold markets.
The turmoil in Chinese markets spilledd over into the local equity market, as local resources dropped by close to -6% as investors anticipated weaker demand for commodities, pulling the broader equity market down by -2.9%.
The Rand depreciated by 2.0% against the US Dollar, as the Dollar recovered against most trading currencies. Read more.