China stock market turnaround hinges on stimulus: KraneShares CIO

China’s slow post-Covid recovery could be a lasting headwind for its stock market.

With the two largest indices of the continent — Shanghai composite and the Shenzhen Composite – each negative so far in 2024 KraneShares chief investment officer Brendan Ahern believes government stimulus is needed to jump-start the country’s stock market performance.

“Investors, especially in mainland China … (are) looking for much, much stronger fiscal support from the government,” he told CNBC’s “ETF Edge” this week. “Until now, we’ve been left to wait.”

Ahern, whose firm he runs KraneShares CSI China Internet ETF (KWEB)added that Chinese households are still reluctant to spend at pre-pandemic levels. The latest reading from the country’s National Bureau of Statistics showed that retail sales of marine goods contracted slightly in June.

“That scar tissue, as well as a housing crisis in China, really hurt the household balance sheet,” he said.

This week’s post-earnings earnings are sinking PDD Holdings it is emblematic of the withdrawal of consumers from China, according to Ahern. He suggests that parent company Temu has focused too much on growth amid a wider decline in spending and fierce competition in e-commerce.

“It’s a little bit crowded and I think right now it’s paying off,” he said. “The company’s hyper growth and that slight miss led to a big, big drop.”

Ahern returned to the idea that a top-down economic recovery may be needed to boost China’s technology sector in particular.

“I think you need to see an amplification of policies and then you will see investors coming back into this space,” he added.

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