The Chinese equity markets have been losing steam recently, leading stock speculators. This is however to enable seek out a new craze to inject some excitement back into their trading. Enter artificial intelligence: this week, Baidu Inc. made headlines when they announced they would be launching a ChatGPT-like service. In addition, also prompted investors to flock to any stocks that were even remotely related to AI technology. This fervor was so strong that two warnings from Chinese state media were issued, as companies were bombarded with inquiries about their own developments related to AI.
However, Beijing has been wary of any behavior resembling ‘meme-stock’ mania such as what occurred in 2021 and 2019. Thus regulators are likely to become increasingly vocal in the coming weeks. This is to address the delicate balance between stimulating the economy. Furthermore managing inflation and financial risk at the same time.
This week, the challenging economic climate in China rattled its repo market. Thus prompting the People’s Bank of China (PBOC) to intervene by injecting 1 trillion yuan ($147 billion) into the financial system over the span of three days.
This action calls back to events two years ago when the PBOC had to step in. The PBOC also implements a large-scale cash squeeze. Thus enabling control of rampant excess liquidity in the middle of the pandemic. This surplus had been funneled into a popular bond-market carry trade. In addition, also pushed the gauge of domestic stocks close to an all-time high before spilling over into Hong Kong’s stock market.
The new wave of investment has created a competitive environment. The prices can shift dramatically from one day to the next. In order to keep up with this rapid pace of change and to ensure volatility, traders must remain vigilant. They should apply while monitoring trends and staying ahead of the curve.
