HONG KONG, March 12 (Reuters) – Chinese stock investors, already disappointed by Beijing’s lower-than-expected economic growth target this year, will be further dismayed by the shock collapse of U.S. lender SVB Financial Group, market participants said.
China’s CSI300 index (.CSI300) fell 4% last week, while Hong Kong’s Hang Seng (.HSI) fell 6%, after China’s modest GDP growth target of 5% for 2023 — rubber-stamped by parliament’s annual session. – dashed hopes for a bigger push.
Market sentiment could be further dampened by start-up-focused lender SVB ( SIVB.O )’s sudden plunge on Friday, sparking heated debate over its fall over the weekend in China.
“The SVB failure is a barometer of macro risks…reflecting how asset prices are affected by central bank rate hikes,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management. assets.
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While the event is unlikely to trigger another financial crisis, it could have a negative psychological impact on Chinese markets, he said.
SVB’s Chinese joint venture with Shanghai Pudong Development Bank ( 600000.SS ) said on Saturday it had a sound corporate structure and independently operated balance sheet, in an apparent bid to appease local customers.
But many Chinese tech start-ups, especially those with dollar funding, have opened US accounts at SVB. At least one WeChat group with several hundred members has been created by SVB’s eager Chinese customers trying to protect their interests.
Low risk appetite from Monday’s widening China-Hong Kong stock connect could dampen any enthusiasm. More than 1,000 A-shares listed in China and nearly 200 Hong Kong-traded shares will be included in the cross-border investment plan.
Li Bei, a fund manager at Shanghai-based hedge fund house Banksia, said he had reduced holdings and “maintained relatively low exposure”, citing a lack of good prospects.
A prudent economic stimulus and relatively tight credit environment for 2023 means “it will be difficult for stocks to move higher from current levels and the market will remain volatile,” Banksia wrote in a letter to investors last week.
China on Sunday kept its central bank governor and finance minister in their posts at the end of a week-long session of the National People’s Congress (NPC) that ushered in Xi Jinping’s third five-year term as Chinese president. Li Qiang, a longtime Xi confidante, was promoted to premier last year to lead an economy that grew just 3%.
Derek Lin, a portfolio manager at Boston-based Columbia Threadneedle Investments, said the government “needs a good year” but is in no rush to start big stimulus, so “the market is trying to get excited, but there’s some reluctance.”
Stanley Tao, founder and CIO of Golden Nest Capital Management, does not expect a broad-based bull market in China this year as the soft asset market remains a drag on the economy. He is wary of tech stocks that could be hurt by US-China friction.
Domestic A-shares, however, are more vulnerable to potential spillovers from an SVB collapse than offshore China stocks, analysts say.
Zhao Bing Zhu, global market strategist at JP Morgan Asset Management, said the SVP failure reflected tighter financing conditions for technology companies during the US rate hike cycle.
“The concern is that we can only see the tip of the iceberg,” Zhu said during Saturday’s live broadcast.
(This story has been reprinted to fix the date)
Additional reporting by Samuel Shen and Georgina Lee; Editing by Raju Gopalakrishnan
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