KraneShares CIO Warns of Persistent Challenges in China’s Stock Market Recovery

China’s stock market recovery continues to falter, with the Shanghai Composite and Shenzhen Composite indexes both showing negative performance so far in 2024. According to Brendan Ahern, Chief Investment Officer at KraneShares, the sluggish post-Covid recovery could pose ongoing challenges for the market.

In an interview on CNBC’s “ETF Edge,” Ahern highlighted that significant government stimulus is essential to rejuvenate market performance. “Investors, particularly in mainland China, are looking for much stronger fiscal support from the government,” Ahern said. “So far, we’ve been left waiting.”

Ahern, who manages the KraneShares CSI China Internet ETF (KWEB), noted that consumer spending in China has not returned to pre-pandemic levels. Recent data from the National Bureau of Statistics reveals a slight contraction in consumer goods retail sales as of June. This enduring reluctance to spend, coupled with a persistent real estate crisis, has adversely impacted household balance sheets.

The recent drop in PDD Holdings’ stock price, following its earnings report, exemplifies the broader consumer spending slowdown. Ahern pointed out that PDD Holdings, the parent company of Temu, has been focusing excessively on growth amid a challenging spending environment and heightened e-commerce competition. “It’s a bit of a crowded long, and I think it’s paying for that at the moment,” he said, referring to the company’s significant post-earnings decline.

Ahern reiterated that a top-down economic recovery strategy might be critical for revitalizing China’s technology sector. “You need to see policy amplification, and then you’ll see investors come back into this space,” he concluded.

In addition to these concerns, China’s current economic landscape also reflects broader issues, such as lingering effects from the real estate crisis and ongoing shifts in consumer behavior. As the market awaits more decisive fiscal policies, the road to recovery remains uncertain.