It’s been a real rough week for Chinese stocks

The concerns are certainly mounting as doubt continues to be cast on Beijing’s ability to stem the economic decline. Domestic demand being dead in the water and weakening consumption remain the biggest issues that needs to be addressed. And investors don’t appear all too optimistic to start the new year.

The CSI 300 index has closed down by another 1.2% today to post its biggest weekly decline since October 2022. We’re on the verge of a break in momentum, in returning to the surge higher before the Golden Week in September.

In the big picture, China valuations will continue to remain cheap. However, it really requires a significant and meaningful turn in sentiment to really get the animal spirits up and running again. And the jump in late September to early October might not turn out to be just that.

At the same time today, we’re seeing USD/CNY rise up above 7.30 for the first time since November 2023 and 10-year bond yields in China falling below 1.60% for the first time on record. Pain.

This article was written by Justin Low at www.forexlive.com.