Here’s a piece of information about the suppression of information that is, in itself, informative.
It’s hard to say what is going on in China’s economy at the moment (little that’s very good, I reckon), but here’s a piece of information about the suppression of information that is, in itself, informative.
Chinese authorities have restricted a key source of data on inward investment as global funds continue to pull money out of the country’s stock market, threatening to make 2024 the first year of equity outflows.
On Monday, daily data showing net investment flows from foreign funds into stocks in mainland China — so-called northbound trades from Hong Kong via the Stock Connect trading link — was no longer available. Information on foreign stock holdings will instead be available quarterly.
The move comes as international investors have pulled more than $12bn out of mainland Chinese equities since the start of June, according to Hong Kong stock exchange data, reversing earlier inflows that many analysts said were driven by the offshore arms of state-backed institutions, and taking year-to-date net flows into the red. There has never been a full year of net outflows since Stock Connect — which allows foreign investors access to China’s stock market — launched in 2014.
And this move is far from the only one of this kind.
For example, the FT mentions that China stopped publishing youth unemployment data last year after the numbers reached a record high (and while we are on the topic of numbers, like Dominic Pino, I do not think that the U.S. employment data has been messed around with, although I do think that it’s worth paying attention to what the numbers now reveal).
This from the FT, was also of note:
Authorities have also tried to bolster markets by telling some domestic financial institutions not to be net sellers of stocks on certain days, via private instructions known as “window guidance”. The move has led to waning liquidity and lower trading volumes on the A-share market, analysts say.
That is yet another reminder that the Chinese economy is run on essentially fascist lines. There is a private sector and there are markets, but they are all, to a greater or lesser extent, subordinated to the interests of the state.
We don’t give investment advice at Capital Matters. It seems to me, however, that, while there can be opportunities for a quick trade, the idea that there are, on any rational basis, “fundamental” grounds for investing in Chinese stocks is a stretch. To start with, a share price is, in no small part, a derivative of vast amounts of information. But when, as in China’s case, so much of that information is “curated” by a state with an agenda of its own, can investors buying (or selling) a security really be sure what is, as the phrase goes, “in” that security’s price? In theory, share prices ought to reflect the unreliability of that information (and be discounted accordingly), but, with so many known and unknown unknowns in China’s case, that discounting is even less of a precise science than usual, and no one should pretend otherwise.