(Bloomberg) — Chinese stocks in Hong Kong fell toward their lowest in nearly 20 years as investor pessimism deepened in the absence of new economic stimulus or market support.
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The Hang Seng China Enterprise Index fell as much as 3.6% on Monday, approaching levels not seen since 2005, making it one of the worst-performing major indexes in Asia. China's big tech companies, such as Meituan and Tencent Holdings, were the biggest drag.
The continued decline in Chinese stocks is in stark contrast to an optimistic Wall Street, which saw the S&P 500 index rise to its highest point in two years on Friday. This also comes after China's commercial financial institutions left their benchmark lending rates unchanged, a move that follows the People's Bank of China's recent decision to maintain borrowing costs, but expects more aggressive stimulus. This could disappoint investors who were
Bloomberg Intelligence analyst Marvin Chen said the recent decline may be due to “a lack of catalysts in the short term and an exodus to more attractive options in the region.” “The global market is booming in the chip sector, an area where geopolitical tensions could cause China and the rest of the world to go their separate ways.”
The mood was similarly volatile in mainland Chinese markets, with the benchmark CSI300 index falling as much as 2.3% on Monday, its biggest decline since late 2022.
The slump has again coincided with a spike in volume in a small number of exchange-traded funds (ETFs) that track major indexes, indicating that government-led buying may be behind the unusual spike. The onshore index ended 1.6% lower on Monday.
The deepening crash has put pressure on mass issuance of so-called snowball derivatives, structured products that promise a bond-like coupon as long as the underlying asset trades within a certain range. The CSI Small Cap 500 Index, the price benchmark for some of these products, fell as much as 3% on Monday, to within 1% of a previously estimated threshold that could snowball into widespread losses.
Share prices of Chinese stocks listed in Hong Kong have fallen about 13% since the beginning of the year, while the S&P 500 index has risen 1.5%. CSI300 fell 5.1%.
The slump in Chinese stocks since the start of 2024 is due to a variety of factors, from the worsening housing recession to persistent deflationary pressures to the Chinese government's reluctance to take active monetary and fiscal policies aimed at restoring growth. This is caused by a combination of factors. Uncertainty about the trajectory of U.S. interest rates and concerns about increased regulatory oversight are adding to the pessimism.
Read more: China's stock market crash reaches $6.3 trillion and gets uglier day by day
Eva Li, head of Greater China equities at UBS Global Wealth Management, said in a press conference on Friday that the benefits of the People's Bank of China's monetary easing have already been priced in, and that a more “punch-packed move” is needed to revive stock prices. “We need a policy,” he said.
–With assistance from John Cheng.
(Updated National ETF turnover details in 6th paragraph)
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