Foreign Investors Show Tepid Interest in China Stocks Despite Anticipated Fed Rate Cut

Despite buzz around a potential U.S. Federal Reserve rate cut, foreign investors remain cautious about China’s stock market. While investors are eyeing opportunities in markets like Japan and the Philippines, China’s slower-than-expected economic recovery continues to dampen sentiment.

Following Fed Chair Jerome Powell’s remarks signaling possible rate cuts, major institutions such as Goldman Sachs and Morgan Stanley predict the Fed might lower rates by 25 to 50 basis points as early as the Sept. 17-18 meeting. Historically, lower U.S. rates have benefited some Asian markets, but China has often lagged behind.

China’s efforts to revive its ailing property sector and tackle deflationary pressures have not yielded significant results, leading to a downgrade in growth forecasts. UBS recently revised China’s full-year growth projection to 4.6% and downgraded Chinese equities from “most preferred” to “neutral.”

While analysts expect the Fed cut to boost certain dividend-yielding stocks in Hong Kong, China’s stock market struggles with fundamental concerns. Year-to-date, key Chinese indices like the CSI 300 and the Star Market 50 have seen significant declines, contributing to a cautious investment outlook.

The potential rate cut could offer limited relief by easing yuan depreciation concerns, but experts remain skeptical about China’s broader economic recovery.