Hyou xijin Is He is best known for his calls to prepare for war with America. But recently the 63-year-old nationalist media star warned his compatriots to invest in Chinese stocks. On July 7, he told 25 million followers on Weibo, a social media site, that he opened a 100,000 yuan (US$13,900) trading account. Stop buying houses, he pleaded, and start getting into the stock market.
Chinese social media is full of positive views on grim market news. Comments like this are becoming the main message netizens receive about the market, regardless of how it is evolving. As China’s economic recovery falters, authorities are cracking down on dissenting or negative views. For some analysts at Western banks, whose job it is to update global clients, the backlash is painful.
Goldman Sachs, an American bank, is the latest to get into trouble. On July 4, a company analyst downgraded its outlook for several Chinese financial institutions and advised clients to sell the shares of banks like the Industrial and Commercial Bank of China amid concerns about bad debts with local governments. This pushed some Chinese bank stocks down several percent.
The state’s response was quick. On July 7th Securities Times, an official newspaper, slammed Goldman, saying the downgrade was based on misinterpretation. Then, on July 10, Banxia Investment Management, a major hedge fund, insisted the bank’s claims would be proven false. On the same day, China Merchants Bank, one of the lenders affected by the downgrade, accused Goldman of misleading investors, Bloomberg news agency said in a statement.
There’s a reason Goldman’s analysis struck a chord. The Shanghai Composite, a benchmark index, is down more than 5% from its peak this year in early May. The index is hovering around 3,200 points, where it has been – barring some boom-and-bust cycles – for more than a decade. A surge in economic activity earlier in the year, as the country abandoned its disastrous zero-Covid policy, raised hopes of a recovery. Most economic indicators are now pointing to a slowdown.
Inflation data released on July 10 showed that consumer prices were flat year-on-year in June, indicating weaker demand. Accordingly, the disinflation of commodity prices is also increasing, since manufacturers have more capacity hsbc, a bench. According to Nomura, another bank, growth in the seven-day moving average of home sales on July 9 fell 33% from a year earlier.
Discussing these trends on social media is becoming increasingly dangerous. Three bloggers, including Wu Xiaobo, one of China’s most prominent financial commentators, were banned from Weibo in late June after hinting at negative market moves. The social media company accused Mr. Wu of spreading false information about the securities industry and undermining government policies.
Established companies are also feeling the effects of the crisis. A financial information provider recently had to deny its overseas clients access to some data, including detailed real estate sector metrics. Consulting firms are targeted when it comes to researching sensitive topics. Chinese stock market regulators have recently been calling for a re-evaluation of cumbersome SOEs, insisting that their value to society as a whole and not just annual earnings should be considered.
For investment advice, Chinese netizens may need to turn to more optimistic commentators like Li Daxiao, a tireless perma-bull fund manager. At times, Mr. Li’s views were so positive that authorities told him to call in when the market slumps so that unsuspecting retail investors don’t follow his advice and lose their savings. After some tough trading days lately, Mr. Li released a video on July 7 to comfort his followers. In it he concludes that “we can only attain future glory by surviving the pale”. Who could doubt such good rhetoric? ■
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