Chinese stocks took a beating in pre-market trading at the time of writing on Tuesday as Chinese e-commerce majors including Alibaba (BABA), JD.com (JD), and Chinese EV majors like NIO (NIO), XPeng (XPEV) and Li Auto (LI) all trended lower.
BABA shares were down as the company announced a surprise management shakeup with its current Chairman and CEO Daniel Zhang to be succeeded by Eddie Wu.
In addition to this, another factor that resulted in a fall in Chinese stocks has been worries over the extent of its economic recovery following the lifting of COVID-related restrictions that had disrupted the country’s manufacturing activity.
Even Goldman Sachs has slashed its growth forecast for the world’s second-largest economy after a Chinese cabinet meeting last week didn’t point towards a “concrete stimulus.” The analysts at Goldman Sachs stated, “The readout suggests to us that the government faces various economic and political constraints. Going down the old route of boosting short-term growth with massive property and infrastructure stimulus goes against the top leadership’s ‘high-quality growth model.”
The analysts added, “On net, we think the persistent growth headwinds (property slowdown and confidence deficit in particular) are likely to win the upper hand in the tug of war between weakening growth momentum and increased policy easing.”
As a result, Goldman analysts slashed their FY23 real GDP growth forecast to 5.4% from 6% and their 2024 growth forecast to 4.5% from 4.6%.
This lowered forecast came even as China’s Central Bank lowered the benchmark lending rates by 10 basis points, in line with expectations.
The worries over China’s economic recovery have led to the Franklin FTSE China ETF (FLCH) down by around 10.1% in the past year.
