China’s latest trade is shorting market forces

China Mobile

18/05/2023 04:17

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pete Sweeney
       HONG KONG, May 18 (Reuters Breakingviews) - Shares in
state giants like China Mobile have rallied as investors seek
shelter under Beijing’s umbrella from private sector crackdowns.
Such companies pay good dividends and rarely default, but their
rising strategic importance under President Xi is a liability,
not an asset.
         
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    CONTEXT NEWS
    The CSI central state-owned enterprise sub-index of the
largest government companies trading in Shanghai and Shenzhen
has risen 10% in 2023, outperforming the benchmark CSI300 index
by roughly 8 percentage points. The CSI private company index
has risen less than 1% over the same period. 
    The so-called Big Four banks, including Bank of China,
Agricultural Bank of China, Industrial and Commercial Bank of
China and China Construction Bank have posted double-digit rises
ranging between 17% and 33% year-to-date. Utilities like China
Mobile have also dramatically outperformed benchmark indexes. 
    China's April industrial output and retail sales growth
undershot forecasts, suggesting the economy lost momentum at the
beginning of the second quarter. The year-on-year figures were
skewed by contractions in April 2022 when the financial hub of
Shanghai and other major cities were under stringent lockdowns.

 (Editing by Una Galani and Thomas Shum)
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