A selloff across Chinese stocks deepened on Tuesday, with concerns about the nation’s ties to Russia and persistent regulatory pressure sending a key index to the lowest level since 2008.
The Hang Seng China Enterprises Index, which tracks Chinese shares traded in Hong Kong, sank 6.6%, following a plunge in the previous session that was the biggest since the global financial crisis. Tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. led the decline. The benchmark Hang Seng Index slumped 5.7%, its biggest decline since July 2015.
The wave of selling continued in U.S. premarket trading, with Alibaba’s American depositary receipts falling 4.6% further. Its e-commerce rivals JD.com Inc. and Pinduoduo Inc. dropped nearly 4% each. Almost all members in the Nasdaq Golden Dragon China Index were indicated lower, spanning shares of electric carmakers Nio Inc. and Li Auto Inc. to video platform Bilibili Inc. The index is at a near-decade low after $1.1 trillion in market value was wiped out from its peak last year.
China’s equities are looking increasingly risky on concerns that Beijing’s ties with Russia could spark new U.S. sanctions. That’s adding to worries about regulatory developments including a possible delisting from the U.S. exchanges. While upbeat economic data was a rare bright spot in the market, growing lockdowns in major Chinese cities are dimming the outlook.
“The selloff is overdone, but so is everything else,” said Andy Maynard, head of equities at China Renaissance Securities. “The market is crazy -- there’s no fundamentals anymore. This might be worse than the 2008 financial crisis.”
Hang Seng Tech Index had its most volatile day ever on Tuesday
The Hang Seng Tech Index saw an intraday swing of 10 percentage points on Tuesday, the wildest ever since the gauge was launched in 2020, Bloomberg-compiled data show. The China tech gauge lost 8.1%, extending declines from a February 2021 peak to nearly 70%.
“When faith is gone, people are ready to see a dark shadow in everything, some are even suspicious of the solid economic figures today,” said Yu Yingbo, an investment director at Shenzhen Qianhai United Fortune Fund Management Co Ltd. “It’s just a planned, persistent and synchronized selling.”
The selloff in Chinese equities has been especially severe in the tech sector. Already battered by Beijing’s yearlong regulatory crackdown and a looming Federal Reserve rate hike, sentiment toward Chinese tech had morphed into fear in recent days as investors turned their attention to the risk of sanctions should China offer aid to Russia for its war.
That triggered a 11% slump in the Hang Seng Tech Index on Monday, its worst daily drop since the gauge’s July 2020 inception. JPMorgan Chase & Co. analysts have even labeled some Chinese internet names as “uninvestable”.
On Tuesday, China’s foreign minister Wang Yi -- in his most explicit statement yet on American penalties -- said he wants the nation to avoid being impacted by U.S. sanctions over Russia’s war. That did little to calm markets, with China’s CSI 300 Index closing down 4.6%, the steepest since July 2020.