It was a challenging quarter for China given fears of a potential slowing of China’s economy due to rigorous coronavirus controls, and tight curbs on property after the real estate giant Evergrande ran into trouble and faced potential debt default. This resulted in negative sentiment on the economy and weighed on investors’ fear of the likely impact on peers. The central bank injected as much as USD 85 billion liquidity in September to shore up the drying liquidity. On top of this, extensive power shortages also gripped large parts of China.  The combination of these factors has led to sharp cuts in near-term growth forecasts for China.  For example, September’s purchasing manager’s index came in at 49.6%, in recessionary territory for the first time since March 2020. Rising commodity prices, and the power shortage are both culprits here. The good news is that the non-manufacturing business index jumped to 53.2% in September, 5.7 percentage points higher than in August, indicating a nice recovery in the service sector.

For equity investors, there was also some big news –The new Beijing Stock Exchange (BJSE), announced by President Xi himself, is set to serve smaller enterprises. The BJSE will have flexible funding and listing rules, with no entry threshold for institutional investors.

China’s trade surplus remains undimmed by tariffs or renminbi strength.

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Source:  Reuters, Marco Polo Pure Asset Management, Open Door