(Bloomberg) — A selloff in Chinese stocks deepened, with a key index wiping out all the gains that it made on optimism over stronger support measures by the authorities.
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The benchmark CSI 300 Index of mainland shares slid as much as 1.3% before paring losses, briefly wiping out gains made since Jan. 22 when authorities pledged more forceful measures to support the market. That was followed by expectations of a 2 trillion yuan ($278 billion) rescue package and the central bank’s decision to cut banks’ reserve requirement ratio.
Stocks extended losses Wednesday after a report showed China’s factory activity contracted for a fourth month in January as new orders shrank. The data added to concerns over the stuttering economy and property crisis that made benchmarks in Hong Kong among the world’s worst performers this year.
“Investor sentiment is still extremely bearish on China — any minor rally driven by piecemeal news of government support is likely to be met by more selling,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “It’s not clear whether China’s structural issues can be resolved and how determined the leadership is in prioritizing growth.”
Renewed gloom has descended due to the lack of further details about the stabilization fund and also after a Hong Kong court ordered the liquidation of China Evergrande Group. The CSI 300 is down more than 5% in January, set for its worst start to a year since 2022.
Some $6 trillion has been wiped off the market value of Chinese and Hong Kong stocks since a peak reached in 2021 and investors are demanding that authorities deploy bolder measures to arrest the downturn.
Read more: China Markets Show Pressure Is Growing for Beijing to Do More
The Hang Seng China Enterprises Index, which tracks mainland stocks listed in Hong Kong, dropped more than 1%, bringing it closer to erasing all the gains made since the report of the rescue package. The gauge is heading for its worst January since 2016.
–With assistance from Charlotte Yang.
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