New trends suggest that capital is shifting from Bitcoin and other Asian equities into Chinese stocks, as China’s stock market has seen a resurgence, fueled by a wave of stimulus from Beijing.
Rising dragon
China’s struggling stock market bounced back since late September, largely due to government stimulus efforts, and this surge could be drawing money away from the crypto market, thus limit gains for Bitcoin or even other Asian markets.
Danny Chong from Digital Assets Association Singapore, explained that even with a 3-5% cost to convert stablecoin USDT into equities, the possible upside of 50-70% in Chinese stocks makes this a smart choice for investors.
The stimulus measures haven’t only boosted Chinese stocks but are also affecting other markets in Asia.
Eric Yee, a senior portfolio manager at Atlantis Investment Management mentioned that they are reducing their long positions across Asia to invest in China instead.
Temporary shift but big impact?
Since September 24, the Shanghai Composite Index has increased by over 20%, reaching its highest level since May last year.
Similarly, the Hang Seng China Enterprises Index, which includes Chinese stocks listed in Hong Kong, has risen more than 25%.
This rally follows announcements of stimulus measures that include interest rate cuts and support for property prices.
Chong believes this capital shift is likely temporary and that investors will eventually return their focus to cryptocurrencies.
This reflects a growing mindset among investors who are willing to move between different asset classes to maximize their returns.
“Once the peak of the recent upward move in Chinese equities stabilizes, we can expect to see a redeployment of capital back into crypto.”
Stimulus may not enough?
While some traditional market analysts see this stimulus as beneficial in the short term, they warn it may not solve deeper economic issues.
TS Lombard noted that without addressing fundamental problems like damaged bank balance sheets, any boost from these measures might not last long.
They pointed out that the latest stimulus is only about 1.5% of China’s gross domestic product, which is much lower than previous years when it was 32% in 2008 and 22% in 2015-16.
BCA Research echoed this sentiment last week, suggesting that the rally in Chinese stocks may not be sustainable.
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