Chinese stocks in post-holiday hangover as the cold reality of emerging market rout sets in
China’s stocks slumped by the most in almost four months when trading resumed on the country’s Shanghai and Shenzhen exchanges after a weeklong holiday, as investors caught up with a rout in global equities.
The CSI 300 Index, which tracks 300 of the largest stocks on both exchanges, dropped by 4.3 per cent, the biggest single-day percentage plunge in 31 months, to 3,290.90. The benchmark on the Shanghai exchange fell by 3.7 per cent while the key gauge on the smaller Shenzhen bourse tumbled by 3.8 per cent.
Investors fled Chinese equities, causing trading volume in Shanghai to soar by 32 per cent over the 30-month average, according to Bloomberg data.
“It’s basically a catch-up as the bad sentiment spills over to the local market,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “The jump in US Treasury yields will probably cause a global liquidity squeeze. On top of that, the angst about an all-out confrontation between the US and China still lingers.”
Chinese traders were looking to regional markets for cues as trading resumed on Monday, even as the central bank said on Sunday that it will lower the amount of reserves commercial lenders must set aside for a fourth time this year.
The MSCI Emerging Markets Index tumbled 4.5 per cent last week and the Hang Seng Index sank 4.4 per cent for the biggest drop for the five-day period since February. The surge in the US Treasuries yield to a seven-year high roiled global financial assets from stocks to developing-nation currencies on mounting concerns about capital outflows. China’s onshore yuan fell as much as 0.5 per cent on Monday.
Mainland stocks also dropped as a purchasing managers’ index showed China’s manufacturing industry expanded at the slowest pace since February last month.
Overseas investors sold a combined 9.6 billion yuan (US$1.39 billion) of Chinese shares through the exchange links with Hong Kong on Monday, the first daily net outflow in four weeks, Bloomberg data showed.
The rout in China’s equities market spread south to Hong Kong, weighing on the benchmark Hang Seng Index, which fell 1.4 per cent to 26,202.57. The Hang Seng China Enterprise Index, which tracks the performance of Chinese companies on the Hong Kong exchange, lost 1.3 per cent.
Chinese consumer staples and pharmaceutical stocks were the biggest losers among all 10 industry groups on the CSI 300, falling by at least 4.6 per cent.
Shanxi Xinghuacun Fen Wine Factory slid 8.1 per cent to 43.47 yuan and Wuliangye Yibin sank 6.6 per cent to 63.48 yuan. Chongqing Zhifei Biological Products plunged by the 10 per cent daily limit to 44.06 yuan.
The stocks of Chinese studios fell, after official data showed that box office receipts had fallen by 28 per cent during the seven-day nationwide holiday from October 1, compared with a year earlier. Beijing Enlight Media retreated 7.2 per cent to 7.23 yuan while Beijing HualuBaina Film & TV lost 5.1 per cent to 5.36 yuan.
The sector was also buffeted by increased government scrutiny as Fan Bingbing, China’s highest-paid actress, was ordered by the taxation authority last week to pay 884 million yuan in overdue taxes and fines.
China Vanke led property developers lower as home sales slowed amid government’s cooling measures. Vanke slumped 9.3 per cent to 22.05 yuan and Poly Real Estate Group slid 6.7 per cent to 11.35 yuan.
Evergrande Health Industry Group tumbled 16 per cent to HK$8.78. Faraday Future, the California-based electric car start-up founded by Chinese magnate Jia Yueting, is seeking to terminate a stake sale deal with the company that made an initial investment of US$800 million, according to an exchange filing by China Evergrande Group, the company’s parent. China Evergrande lost 6.3 per cent to HK$20.95.