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(Bloomberg) – Chinese stocks fell on Friday, ending a volatile week for investors struggling to integrate Beijing’s tightening regulatory grip after a rout pushed the country’s key stock index to the brink of ‘a bear market.
The CSI 300 index fell 0.8% on the day and 5.5% on the week, the worst since February. In Hong Kong, the Hang Seng Index, which earlier this week posted its biggest two-day loss since 2008, fell 1.4%. Alibaba Group Holding Ltd. slipped 4.2% while Meituan lost 5.9%. Tencent Holdings Ltd. fell 2.6%.
Investors face an uncertain regulatory landscape, given the range of sectors targeted by the government. From the derailment of Ant Group’s successful IPO to rules limiting monopoly practices in the internet space, reducing leverage in the real estate sector and reforming the tutoring sector, the investors continue to change rapidly. About $ 1.5 trillion in market value has evaporated in these sectors since February, according to data compiled by Bloomberg.
“It’s the fear of the unknown,” said Justin Tang, Asia research manager at United First Partners. “Market sentiment is on thin ice. Investors were probably expecting more meat, but they were left with nothing but bones when it came to the details of the Chinese government’s urging to calm down.
This week’s steep stock market declines were sparked by China’s decision to ban entire swathes of its burgeoning tutoring industry from making a profit. It was the most extreme government move to date to curb companies it accuses of exacerbating inequalities, increasing financial risks and challenging the Communist Party’s grip on key segments of the world. ‘economy.
The ensuing rout was fierce enough that Beijing signaled its discomfort. State media ran a series of articles suggesting the sale was overdone, while the national securities regulator held a video conference with bank executives to get the message across that education policies do not were not intended to harm businesses in other sectors.
“Confidence is not fully restored,” said Steven Leung, executive director of UOB Kay Hian (Hong Kong) Ltd. “Investors need more explanation from regulators to clarify these political uncertainties.”
China’s central bank injected a larger than usual 30 billion yuan ($ 4.6 billion) in cash into the financial system for a second day in a row. The move was taken to appease market nerves and ensure a sufficient supply of liquidity towards the end of the month, analysts said. The country’s sovereign bonds climbed for a seventh straight week, marking the longest period of gains in more than three years, as stocks falter and slower growth stoked bets on monetary easing.
The Chinese CSI 300 index closed down 7.9% for the month, its worst performance since October 2018. The Hang Seng index is down 9.9% for the period.
BNP Paribas lowered its weighting in China to neutral compared to its overweighting in the broker’s model allocation for Asia, excluding Japan. “We believe regulatory pressure may continue for now,” analyst Manishi Raychaudhuri wrote in a note dated Thursday. He added that Chinese tech hardware, mobile games, stocks related to electric vehicles and new energies “could be relatively immune.”
Winners
Renewables and semiconductor stocks were bright spots amid the rout, with the top 10 performers of the CSI 300 this week all related to the themes. Renewable energy equipment maker Sungrow Power Supply Co. and communications equipment maker Wingtech Technology Co. gained more than 20%, as companies appear to benefit from China’s structural shift towards greater innovation.
The Star 50 Index, which counts such companies among its members, has risen 1.8% in the past five days.
Meanwhile, the Hang Seng Tech Index fell 2.6% on the day and 17% for the month, the highest since October 2018. Friday’s drop followed a drop in Chinese stocks listed in United States on Thursday, as investors looked at Didi Global Inc.’s past earnings, amid reports the rideshare company was considering going private.
(Update prices everywhere)
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