Chinese markets remain under pressure due to weakness in market sentiment. Economic fundamentals are soft, confidence weak, uncertainties over the policy direction and COVID restrictions casted a shadow over the market outlook. Over the month of September, the CSI 300 Index slumped 6.72% (9.67% in US$ terms), while the Hang Seng Index crashed 13.85% (13.86% in US$ terms) over the same period.

Economic fundamentals have yet to recover, with most PMIs close to or staying in the contraction zone, sector indicators also show muted consumption, investment, and industrial activity. The overarching backdrop has not changed, with the property sector in China remaining in deep trouble. Local authorities have been active in attempting to support the sector via policy initiatives. However, the effectiveness of the policies are yet to be seen given the dismal property sales in the country.

With the issue in the property market unsolved, economic effects rippled through the economy. The property sector has a large direct and indirect impact on the GDP itself, and the reverse wealth effect will impact the consumption power of the middle class. Moreover, the ongoing COVID outbreak also dampens consumer sentiment. With the 20th National Congress of the Chinese Communist Party coming up, we hope for more clarity on the policy direction, and will suggest investors to hold off from building Chinese equity exposure before we see further guidance.