In 2021 Q4, respondents to the Cheung Kong Investor Sentiment Survey continued their conservative expectations for China’s A shares with 60.2% of the respondents believing that A-shares will rise in the next 12 months, a decrease of 0.8 percentage points from the 2021 Q3 survey and a decrease of 7.3 percentage points from the same period last year. Respondents did not have high expectations for the A-shares in the next 12 months with an average expectation of -0.8%, which is only 0.1 percentage points higher than the previous quarter, and 2.6 percentage points lower than the survey the year before.
Respondents also lowered their expectations for real estate compared with late 2020. 55.9% of respondents believe that housing prices in first- and second-tier cities will rise in the next 12 months, down 13.5 percentage points from the survey at the end of 2020. The expected return on home prices is 1.4%, down 2.2 percentage points from the end of 2020.
Respondents’ conservative sentiment towards the market may come from concerns about long-term economic growth. In 2021 Q4, respondents lowered their expectations for long-term economic growth. 58.9% of respondents believe that GDP growth will exceed 5% in the next five years, a decrease of 3.8 percentage points from the previous quarter. The average expected growth rate of GDP was 5.4%, a decrease of 0.2 percentage points from the previous quarter.
Similar to the previous quarter, financial practitioners and retail investors had very different sentiments on investment and the macro economy. Financial practitioners are more optimistic than retail investors. Regarding the trend of A-shares in the next 12 months, 52.8% of retail investors believe that they will rise, compared to 83.5% of financial practitioners. The expected return of A-shares in the next 12 months for retail investors are -3.2%, while financial practitioners are 6.6%. Only 49.2% of retail investors believe that housing prices in first- and second-tier cities will rise in the next 12 months, compared to 77% of financial practitioners. The expected return on house prices in the next 12 months is 0.8% for retail investors and 3.5% for financial practitioners.
The “Cheung Kong Graduate School of Business Investor Sentiment Survey (CKISS)” report is a survey of investor sentiment and expectations in China’s capital market. It is based on a large sample survey of approximately 2,500 investors from 13 important cities in China. The Q4 survey findings was based on data collected in December 2021, as well as financial reports of A-share listed companies collected in the third quarter of 2021, and other latest domestic and foreign capital market and macro data. The report is divided into two parts: the first part uses questionnaires to understand investors’ views on the future trend of asset prices such as the stock market and real estate, as well as their expectations on macro indicators such as economic growth; the second part combines macroeconomics and data from listed companies which are used to analyse the reasons for the investor sentiment.
Respondents’ expect China’s inflation remain stable despite soaring inflation in Europe and the United States.
A big change in 2021 is the soaring inflation in Europe and the United States: as of November 2021, the US CPI increased by 6.8% year-on-year, and the euro area increased by 4.9% year-on-year, of which Germany has increased by 6% and France has increased by 3.4%. The CPI has reached the highest level for the first time since the oil crisis in the mid-1970s and the U.S. savings and loan crisis in the early 1980s.
Although inflation is currently a global risk, China’s CPI is not high, and the year-on-year growth rate at the end of November was only 2.4%. PPI experienced a year-on-year increase of 13% due to its global linkage. Respondents lowered their expectations for domestic inflation. 3.5% of the respondents believed that high inflation of more than 6% would occur (3.9% for retail investors and 2.2% for the financial industry), an increase of 0.3 percentage points from the previous quarter. (Retail investors and the financial sector increased by 0.2 and 0.7 percentage points, respectively). The expected growth rate of prices in this period is 2.5% (2.5% for both retail investors and the financial industry), which is the same as the previous period.
Respondents overall lowered their expectations for long-term economic growth, in line with the government’s overall judgment of the economy.
Respondents’ conservative sentiment towards the market comes from concerns about long-term economic growth. 58.9% of respondents believed that future GDP growth could exceed 5% ( Retail investors and financial industry were 56.6% and 65.8% respectively), a decrease of 3.8 percentage points from the previous period (retail investors and financial industry were down 4.1 and 3 percentage points respectively); the expected growth rate of GDP was 5.4% (retail investors and financial industry respectively 5.3% and 5.5%), a decrease of 0.2 percentage points from the previous period (retail investors and financial industry decreased by 0.2 and 0.1 percentage points respectively).
These findings are in line with the government’s overall judgment of the economy. Although the overall economic growth rate in 2021 is 8.1%, from the first quarter to the fourth quarter, the growth rate has been in a downward trend, of which the year-on-year growth rate in the fourth quarter was only 4%. The Central Economic Work Conference held from December 8th to 10th made a new prediction of China’s economic situation and put forward three severe challenges facing the economy – supply chain disruptions, demand contraction, and weakening expectations. Our data identified weaker expectations in the first quarter of 2021, and developments in subsequent quarters have continued this trend.
A functioning capital market is a strong indicator on the health of the economy. Our survey found that investors continued to lower their expectations for the future in 2021, providing useful economic data. The survey found that the pressure on China’s capital market mainly comes from seven factors including international pressure and domestic policy adjustment, specifically:
These seven factors mentioned above mean that uncertainty is expected in capital markets in 2022. However, with China’s expected easing of its monetary policy and domestic structural reforms, capital markets could be bottoming out.
The Cheung Kong Investor Sentiment Survey (CKISS) is a survey on investor sentiment and expectations in the capital market, co-sponsored by Cheung Kong Graduate School of Business’ (CKGSB) Center for Investment Research and the Business Scholars Program. It is led by Doctor Liu Jing, CKGSB Professor of Accounting and Finance, and CKGSB researcher Chen Hongya.
The first survey was conducted in January 2018 and targeted over 60 outstanding entrepreneurs. In August 2018, the survey expanded its scope to 13 major Chinese cities and conducted on a quarterly basis with approximately 2,500 valid samples, including 1,900 samples from individual investors and 600 from institutional investors. The Center for Investment Research at CKGSB aims to offer a more comprehensive understanding of the capital markets in China and abroad using CKGSB’s unique theoretical & practical perspective.
For more information, please visit: https://english.ckgsb.edu.cn/worldwide/insights/the-ckgsb-investor-sentiment-survey/