China's CSI300 Faces Bear Market Risk... State Media Suggests "It Could Be a Buying Opportunity"

[Asia Economy Reporter Park Byung-hee] Bloomberg reported on the 26th (local time) that the China CSI300 index is on the verge of entering a bear market.

The agency stated that the CSI300 index gave up all of its early gains of up to 0.9% at the opening and fell nearly 20% from its peak in February last year. Generally, when an index falls more than 20% from its previous high, it is considered to have entered a bear market.

The CSI300 index closed the morning session slightly down and widened its losses to 0.6% in the afternoon before reversing to an increase.

Bloomberg reported that although the risk of entering a bear market has increased, Chinese state-run media released forecasts on the same day suggesting it could instead be a buying opportunity.

According to Bloomberg, at least two Chinese state-run media outlets warned of risks from a global stock market sell-off but also noted that the Chinese stock market could benefit from the authorities' monetary easing policies. They emphasized that the market correction could be a buying opportunity.

Marvin Chen, an investment strategist at Bloomberg Intelligence, citing local Chinese media, explained, "The Chinese authorities have already implemented monetary easing, and there are concerns about increased volatility in the Chinese stock market caused by the U.S. Federal Reserve (Fed)." Chen added, "Liquidity conditions may show significant volatility until the Lunar New Year holiday, but after the holiday, easing measures are expected to take effect and stabilize the market somewhat."

In fact, the People's Bank of China, the country's central bank, cut the loan prime rate (LPR), which is effectively the benchmark interest rate, by 0.1 percentage points on the 20th. The People's Bank of China has lowered the LPR for two consecutive months, expanding stimulus measures to prepare for economic slowdown. Earlier this month, the China Securities Regulatory Commission announced that it would take measures to stabilize the market after global stock markets plunged due to concerns over U.S. tightening.

Amid China's monetary easing stance, more global banks have recently upgraded their investment opinions on Chinese stocks.

Deutsche Bank upgraded its investment rating on Chinese A-shares and H-shares from neutral to overweight last week. Deutsche Bank noted that the monetary policy directions of the U.S. and China are diverging, with tightening in the U.S. and easing in China, which it believes will benefit the Chinese economy and stocks.

Earlier this month, Jefferies Financial Group issued a buy recommendation on Chinese stocks. In its report dated the 17th, Jefferies stated that the MSCI China index has an 83% probability of rising this year with an expected return of 23%.

The last time the CSI300 index entered a bear market was in 2018, when the trade dispute with the U.S. acted as a negative factor.

This content was produced with the assistance of AI translation services.