(Bloomberg) — The sell-off of Chinese shares intensified on Tuesday. Concerns about the nation's ties to Russia and persistent regulatory pressure caused a key index to fall to the lowest level since 2008.
The Hang Seng China Enterprises Index, which tracks Chinese stocks traded in Hong Kong, plummeted 6.6%, following a decline in the previous session that was the largest since the global financial crisis. Tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. led the decline. The Hang Seng benchmark plummeted by 5.7%, its biggest drop since July 2015.
China's actions seem increasingly risky due to concerns that Beijing's ties with Russia could provoke new US sanctions. That adds to concerns about regulatory developments, including a possible exclusion from US stock exchanges. While economic data were positive for the market, increasing closure measures in major Chinese cities obscure the outlook.
“The liquidation is exaggerated, but so is everything else,” said Andy Maynard, director of equities at China Renaissance Securities. “The market is crazy, there are no more fundamentals. This could be worse than the 2008 financial crisis.”
The Hang Seng Tech index recorded an intraday variation of 10 percentage points on Tuesday, the most pronounced since the indicator was launched in 2020, data compiled by Bloomberg shows. China's tech indicator lost 8.1%, extending the loss by nearly 70% since a peak in February 2021.
“When faith disappears, people are open to seeing the negative in everything, some even suspect today's strong economic figures,” said Yu Yingbo, investment leader of Shenzhen Qianhai United Fortune Fund Management Co Ltd. “It's just a planned, persistent and synchronized sale.”
The sell-off of Chinese shares has been especially severe in the technology sector. Beijing's regulatory crackdown and an imminent increase in Fed rates have impacted the sector, and the outlook for Chinese technology has turned to fear in recent days, as investors turned their attention to the risk of sanctions if China offers aid to Russia in the war.
That caused an 11% drop in the Hang Seng Tech Index on Monday, its worst daily drop since the indicator's start in July 2020. Analysts at JPMorgan Chase & Co. even say that some Chinese internet stocks “are not enough to invest.”
On Tuesday, China's Foreign Minister Wang Yi — in his most explicit statement yet on US sanctions — said he wants the country to avoid being affected by US sanctions due to the war in Russia. His comments failed to calm the markets. China's CSI 300 index closed with a 4.6% drop, the worst since July 2020.
Original Note:
Relentless Selling in China Stocks Evokes Memories of 2008 Crash
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