China stock market: Strong rise after state intervention

China stock market: Strong rise after state intervention

According to a report by finanzmarktwelt.de,

The stock market in China has experienced a sharp fall in recent weeks and months. But this week there was a turnaround and prices are rising again. Funds tracking the Chinese stock market recently saw their largest weekly inflows ever, according to Bank of America (BoA) strategists. In the week ended February 7, a record $19.8 billion flowed into funds focused on the Chinese stock market. This rush was likely driven by government-backed investors. The Chinese government has intervened massively in the stock market, which has led to a significant recovery in Chinese onshore stocks and important benchmark indices.

The impact of this government intervention can be significant. The massive inflows into the Chinese stock market may lead to a temporary recovery and boost investor confidence. However, in the long term, a heavy reliance on government intervention can weaken the confidence of market participants and reduce the efficiency of the market.

Government purchases of onshore Chinese stocks last month were estimated to have reached 70 billion yuan ($9.7 billion). This shows the extent to which state actors are trying to stabilize the market. The short-term impact may be positive, but the long-term consequences remain to be seen.

China's stock market recovery was already showing signs of weakening today as the MSCI China Index fell for a third day ahead of the Chinese New Year holiday. Markets in mainland China remained closed on Friday and will remain closed next week. These developments show that volatility and uncertainty remain in the Chinese stock market.

It remains to be seen how lasting the government interventions will influence the market and whether they will lead to a stable and efficient market environment in China in the long term.