A key gauge of Chinese stocks was on track to enter a bear market as a weak economic recovery and tensions with the US left traders with little reason to buy.
The Hang Seng China Enterprises Index dropped as much as 0.8% on Tuesday, marking the fifth day of declines and taking its losses from a Jan. 27 peak to about 20%. Meituan and Tencent Holdings Ltd. were among the biggest drags.
The grim milestone deals a blow to investors who’d been betting on a revival after the reopening rally flopped at the end of January. Some China bulls are retreating in frustration, trimming portfolio allocations as they come to terms with a lackluster economic recovery and modest earnings.
READ: Niche Commodities Sound Alarm in Every Corner of China’s Economy
“There is just no positive news out there and it’s really tough for investors,” said Willer Chen, a senior analyst at Forsyth Barr Asia Ltd. “The weak macro data for April serves as a wake up call for a lot of investors, while Sino-US relationship is not helping as no major ice breaker has been witnessed.”
In a sharp reversal of fortunes from earlier this year — when buy calls were dominant — investors see a lack of catalyst for gains as the post-Covid recovery sputters and regulatory uncertainties still abound. Tussles with US on a wide range of issues continue to make investors wary, with Beijing’s rejection of a US request on a defense chiefs meeting adding to the jitters.
READ: China Spurns US Defense Chiefs Meeting Amid Sanctions Snag
Pessimism is everywhere. Foreign funds are on track to trim their holdings of mainland shares for a second straight month, something that hasn’t happened since the rout in October. Domestic fund sales have fallen to near levels seen after the 2015 market collapse as investors remain risk averse, Shanghai Securities News reported Tuesday.
The HSCEI gauge has lost about half of the gains seen during November-January. While some sectors related to artificial intelligence and state-owned enterprises have seen bouts of rallies, they haven’t been enough to lift the broader market.
The onshore CSI 300 Index was down as much as 0.9%, extending losses after wiping out all its gains for 2023. The Hang Seng Index lost 0.8%.
