Chinese stocks have been a US$955 billion blunder in 2023 for market forecasters. Bears still have reasons to predict more pain

The performance of Chinese stocks in 2023 has been a major disappointment for optimistic investors. The market has seen a staggering loss of nearly US$955 billion in value across various stock exchanges. Some of the biggest names in the Chinese market, such as Alibaba Group and JD. com, have seen their share prices plummet by up to 52 percent.

Analysts initially overestimated the strength of China's economic recovery post-COVID-19, leading to a series of policy measures that fell short of expectations. The real estate sector, exemplified by the struggles of giants like China Evergrande, has been a significant factor in undermining investor confidence. Additionally, the devaluation of the yuan has compounded the losses, with further declines anticipated by experts.

The outflow of capital from China has reached record levels, with foreign investors selling off a substantial amount of onshore stocks. Major investment firms and hedge funds have revised their strategies, with some reducing their Chinese stock holdings by more than half. Despite some state interventions to stabilize the market, the overall sentiment remains cautious. Investors are now weighing the risks associated with China's market, including geopolitical tensions and the ongoing challenges in the real estate sector, against the potential for long-term growth.