(Bloomberg):In the heyday of emerging markets, the sudden frenzy that sent Chinese stocks soaring would have been big news on Wall Street.

However, this resurgence of the stock market in the world’s second-largest economy has made little impression on US traders, with China’s limited role as a driver of the US economy and Chinese policymakers concerned. It also highlights doubts that the world’s economy can solve deep-seated problems with growth.

The loss of enthusiasm was noticeable in trading on September 30th. The CSI 300 index, a benchmark for mainland Chinese stocks, rose more than 8%, while the S&P 500 index briefly fell. Although there was a late recovery and some indicators showed that the US and China had avoided the biggest divergence since the 2008 financial crisis, US stocks rose 26% over the past six trading days, while Chinese stock indexes rose 26% over the past six trading days. It is clear that US stock traders are largely ignoring the speculative fever in Asia, with the index only up 1%.

However, this does not mean that foreign investors are sitting idle. In response to a series of policy relaxations in China, including loosening regulations on home purchases, many exchange-traded fund investors are putting their money into U.S.-traded funds that invest in big Chinese companies and technology stocks.

However, this new market frenzy remains largely regional. In recent years, while China has struggled to prop up its market due to its massive debt problem, there was a time when U.S. stocks hit record highs due to enthusiasm for major technology stocks, widening the gap between the U.S. and Chinese markets. is the latest one.

Mike Wilson, chief U.S. equity strategist at Morgan Stanley, said on Bloomberg Television that China’s stimulus plans will “change the U.S. growth trajectory in a meaningful way. We need to see it,” he said.

U.S. stocks have outperformed Asian stocks this year and for much of the post-coronavirus period. Meanwhile, the Chinese government’s efforts to revitalize the economy face deep-rooted doubts due to repeated policy failures.

Moreover, even if China’s leadership were able to accomplish this feat, it remains unclear how much the United States would benefit. The United States is significantly less dependent on trade growth than many other developed countries, and China just ceded its position as America’s largest trading partner to Mexico.

Currently, the S&P 500 has a near-record valuation premium over Chinese stocks, and investors are weighing domestic market factors such as the continued resilience of U.S. consumers and the trajectory of interest rate cuts by the U.S. Federal Reserve in determining the future outlook. We are looking at the factors.

Meanwhile, Chinese stocks have risen significantly this month, with Hong Kong and Shanghai indexes occupying the top three spots out of 92 major global indexes, according to Bloomberg data.

Given that Chinese stocks were among the worst performers last year and were even said to be “uninvestable” at one point, sentiment has changed dramatically. The recent rally has been driven by short sellers betting on a decline, forcing them to buy back stocks to limit their losses.

However, the recovery is still in its early stages, with the CSI300 still 30% below its 2021 high. Furthermore, the challenges facing China, such as the real estate crisis, deflation, slowing growth, and rising unemployment among young people, are not going to go away anytime soon.

“It is unclear whether these large-scale measures will help China’s deeply troubled real estate sector and allay consumer fears,” said Gina Martin Adams, chief equity strategist at Bloomberg Intelligence. pointed out. “China’s actions over the weekend have not boosted the overall outlook for emerging markets in 2024 or 2025, and analysts and investors are still assessing the impact.”

Original title: Erupting China Stocks Barely Audible to US Traders in Fed Bubble (excerpt)

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