China’s blue chip stock indices closed down sharply this year. The Shanghai Composite stock market ended down -15.1% for the year, the Shenzhen Component plunged 26% to 11,016 in 2022, both benchmarks notched their first annual losses since 2018. It has been a tumultuous year for Chinese investments with the implosion of China’s property sector and China’s Covid Zero policy, which it abandoned in late December as the virus spread rampant through the country. Hong Kong’s Hang Seng was down 15.5% for the year.
On the last day of the trading year the Shanghai composite was up +0.5% and +1.4% for the week. In December it was down 62.08 points or 1.97%. The index has been down five of the past six months with the constant flow of negative news out of China.
2022 closed with busy IPO Day
Six companies started trading on the China mainland’s exchanges on the last trading day of the year. The biggest gainer was Ferrotec Technology Development, which surged 78% to 15.01 yuan in Shenzhen. The worst was Qingdao Sunsong, which tumbled 29% to 7.81 yuan in Beijing.
Shanghai Composite from Key Lows and Highs
- Off 49.29% from its record close of 6092.06 hit Tuesday, Oct. 16, 2007
- Off 15.13% from its 52-week high of 3639.78 hit Friday, Dec. 31, 2021
- Up 7.03% from its 52-week low of 2886.43 hit Tuesday, April 26, 2022
- Off 14.95% from its 2022 closing high of 3632.33 hit Tuesday, Jan. 4, 2022
- Up 7.03% from its 2022 closing low of 2886.43 hit Tuesday, April 26, 2022
Asia Pacific Region Equity Markets in 2022
- Japan’s Nikkei: (-0.5% for the week/-9.4% for the year)
- Hong Kong’s Hang Seng: (+1.0% for the week/-14.4% for the year)
- China’s Shanghai Composite: (+1.4% for the week/-15.1% for the year)
- India’s Sensex: (+1.7% for the week/+4.4% for the year)
- South Korea’s Kospi: (-3.3% for the week/-24.9% for the year)
- Australia’s S&P/ASX 200: (-0.9% for the week/-5.45% for the year)
How Global Indices Fared in 2022
The Chinese currency is key to a major trading nation like China. China’s renminbi hit its weakest level against the dollar since 2007 as concerns over President Xi Jinping’s appointment of a harder line leadership team and a struggling economy spread from equities to currency markets.
Major trading competitor Japan’s Yen is significance for China. Yen weakness places Chinese manufactures at a competitive disadvantage, which has emboldened Beijing to play the currency devaluation card in an attempt to mitigate mounting economic woes and dumping of Chinese assets. Higher-yielding Chinese debt securities are losing their relative appeal (in a rising yield world), and now even the perceived stability of the Chinese currency is in question.
On Aug. 19, the central bank also signaled its preference for a weaker yuan by setting its daily midpoint fix for onshore trading at more than 6.80 against the dollar. This was the first time it had crossed that level in 23 months. The PBOC allows the currency to trade within a daily range of 2% up or down against the dollar from its target level. The market is asking where the upper band is now?
The yuan however has held up better against other currencies this year. China Foreign Exchange Trading System, an arm of the central bank, measures the performance of the currency against a basket of 24 currencies, including the dollar, yen and euro and lesser-traded currencies such as Polish zloty and Russian ruble the WSJ reported. That yuan index was roughly at the same level it was at the start of 2022, according to the most recent data published on Aug. 19.
From The TradersCommunity News Desk