Access the Editor’s Digest for free
Roula Khalaf, Editor of the FT, picks her favorite stories in this weekly newsletter.
Investors are taking notice of the changing landscape in the US economy, with a shift away from high-flying tech stocks to other markets like Europe, the UK, and Japan. However, one market that is not seeing the same attention is China.
While the S&P 500 index in the US is still up this year, China’s CSI 300 index has experienced a decline. This has led to cautious outlooks on luxury stocks, which are often seen as indicators of the Chinese economy’s health.
Barclays analysts visited luxury stores in China and found that trends were worse than expected, leading to downgrades for European luxury companies. This includes Kering and Burberry, both facing potential further declines in their stock prices.
Previously, the focus was on China’s housing market issues, but now concerns are broader. With low inflation and cautious consumer spending, economists are calling for a stimulus package to boost the economy.
Despite Chinese stocks being relatively cheap, investors remain wary. President Xi Jinping’s approach to state intervention is uncertain, adding to the pessimistic sentiment among Chinese investors.
While some believe Chinese equities may be nearing a bottom, others see challenges ahead, including ongoing trade tensions with the US. Many investors are turning to alternative markets like India and Japan to avoid the uncertainties surrounding China.
Long-term prospects for China remain positive, but for now, many investors are hesitant to allocate significant resources to the market. The global economic importance of China is acknowledged, but current conditions make it a tough sell to clients.
katie.martin@ft.com