BlackRock slashes its rating for Chinese stocks with growth faltering and a bazooka stimulus package looking unlikely

  • BlackRock cut its rating for Chinese stocks from "overweight" to "neutral" on Monday.

  • The asset manager's strategists cited growth, stimulus, and geopolitical concerns.

  • The downgrade comes as Beijing battles to revitalize China's economy and crisis-hit property sector.

BlackRock Investment Institute has slashed its outlook for Chinese stocks, with a barrage of weak data fueling pessimism on Wall Street.

Strategists led by Jean Boivin said in a research note on Monday that they had downgraded their rating for China-listed equities from "overweight" to "neutral." They cited slowing growth, limited stimulus, and tensions between Beijing and much of the West.

"We are neutral. Growth has slowed. Policy stimulus is not as large as in the past," the BII team wrote. "Structural challenges imply deteriorating long-term growth. Geopolitical risks persist."

China's crisis-hit property sector also "remains a drag" on the world's second-largest economy, they added.

BlackRock's rating cut comes amid signs that traders are starting to see China as uninvestable, with the benchmark CSI 300 index plunging 32% since the start of 2021.

Foreign investors yanked $188 billion from the country's equity and debt markets in the 18 months to June 2023, according to Bloomberg's calculations, representing a 17% decline.

Beijing called time on its harsh zero-COVID lockdowns late last year, but has since slashed its year-end GDP targets as it grapples with deflation, soaring youth unemployment, and the yuan sinking to a 16-year low earlier this month.

Policymakers have brought in some stimulus measures to try to boost activity, but stopped short of rolling out a so-called "bazooka" or "big bang" package that many economists believe will be necessary to revive growth.

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