More than $ 560 billion in market value was wiped from the Hong Kong and mainland stock exchanges in a week as funds surrendered to once preferred stocks, unsure of which sectors regulators will target next.
The Hang Seng fell 1.8% and its weekly decline of 5.8% was the largest since the peak of pandemic panic in financial markets in March 2020.
Shares in Shanghai also fell, as investors sold off risky corporate debt and the Chinese currency. The yuan was set to suffer its biggest weekly loss in two months as investors rushed to safety amid global coronavirus concerns.
U.S.-listed stocks of Chinese-based tech-related companies gained traction as bargain hunters took advantage of recent sales resulting from Beijing’s ongoing regulatory crackdown, which wiped out half a trillion dollars from Chinese markets this week.
Alibaba Holding Group, Tencent Music Entertainment Group, Didi Global and iQiyi Inc were up 1% to 4.5%.
âThere isn’t really a trigger, but a lot of things that add to the narrative of staying away from China,â said Dave Wang, portfolio manager at Nuvest Capital in Singapore.
“Almost daily negative news comes out, so it makes it look like there is no end in sight.”
Just this week, China announced tougher rules on competition in the tech sector, summoned executives at real estate developer Evergrande to warn them to reduce the company’s massive debt, and state media have reports impending regulation for alcohol manufacturers, a favorite food of foreign fund managers.
In the wake of crackdowns ranging from steelmaking to e-commerce and education, the measures are undermining confidence in a market that still appears to be bottoming after months of selling.
The Shanghai Composite fell 1.1% to its lowest close in more than two weeks on Friday and blue chips fell 1.9% with liquor makers leading the losses.
China Telecom was a rare ray of hope and made its debut in Shanghai.
The epicenter of the liquidation has been the tech sector, which was popular with foreign investors who are now worried about not being able to quantify regulatory risk and are selling in droves.
Hong Kong’s Hang Seng Tech Index, made up of many one-time darlings, fell 2.5% on Friday to a new high and has lost around 48% since February.
Hong Kong shares of e-commerce titan Alibaba fell 2.6% to a record closing low and were halved from the October high. Internet giant Tencent hit a 14-month low and food delivery boy Meituan hit a one-year low.
âThere is a herd mentality right now,â said Louis Tse, managing director of Hong Kong brokerage firm Wealthy Securities. “People see a person selling and then they do the same.”
As a result, Alibaba is now posting its lowest price-to-earnings ratio since listing in New York in 2014 and Tencent its lowest in more than eight years.
âTencent and Alibaba wouldn’t trade around 20 times their profits if the general mood around them was optimism,â said Tariq Dennison, managing director of GFM Asset Management in Hong Kong, who was actually a buyer of both. Friday.
On top of regulatory concerns are fears that China’s economic recovery may falter and debt risks increase, as data points to slowing demand and factory output and suggests authorities are cracking down. a delicate moment.
The persistence of policymakers to curb scorching real estate prices, for example, strained markets and business credit fell further on Friday with news that heavily in debt Evergrande had been reprimanded by regulators.
The yuan fell from its 200-day moving average against the widely rising US dollar and weakened beyond the psychological 6.5 per dollar bar, hitting a three-week low at 6.5059 during onshore trading on Friday.
The Hong Kong dollar is close to its lowest in a year and a half, which also suggests that the money is leaving the city.