Despite Chinese and Hong Kong stocks flirting with annual lows, investor sentiment among institutional traders remains broadly bullish, according to a new survey.
More than 80% of professional investors in China believe prices and yields on Chinese shares for the coming 12 months will rise, up significantly since May, when fewer than half said so, according to a new study by China’s elite Cheung Kong Graduate School of Business (CKGSB).
The study surveyed 1,900 individual investors and 600 institutional investors.
Meanwhile, sentiment among retail investors has veered the other way, becoming more pessimistic toward both mainland and Hong Kong market prospects.
“Institutional investors continue to raise their earnings expectations for China A-shares, Hong Kong stocks, and property prices,” the report said.
In fact, the divergence between retail and professional investors—which has continued to widen throughout the year—was the most surprising finding from the survey, according to Liu Jing, a professor and associate dean at CKGSB who led the team that conducted the study.
The disparity could be explained partly by traditional factors, but also by circumstances unique to China’s current political and economic climate, he said.
“Retail investors and institutional investors are focusing on different things. While the former respond by ‘feeling’ the market, the latter focuses on long-term, structural issues. In the last couple of years, they have mostly moved in the same direction. However, recent events in Chinese capital markets may have different interpretations for the short-term vis-à-vis the long-term,” he told Barron’s.
China stocks have had a tough run since their February high, as Beijing continued its regulatory assault on multiple business sectors, and a brief Covid-19 wave put the country back on edge.
While retail investors comprise the vast majority of trading on mainland exchanges by volume, institutional investors command nearly 80% of trades by market capitalization, according to investment bank CICC.
One retail investor in Beijing, who day trades in between running a hair salon, told Barron’s he felt certain Beijing’s regulatory crackdown was far from over. “Who knows when it will end,” the man, surnamed Wu, said.
Beijing’s widespread crackdowns have hit the ride-hail, food delivery, education, and gaming sectors, among others—with stocks in those areas taking historic beatings and denting the share prices of companies like
Tencent Holdings
(700: Hong Kong),
Meituan
(3690: Hong Kong),
NetEase
(NTES), as well as U.S.-listed firms such as
Didi Global
(DIDI),
Alibaba Group Holding
(BABA),…
Read More: Why China’s Big Investors Are Still Bullish, According to This Study