Nervous investors drove Chinese and Hong Kong stock markets to slump sharply for yet another day on Tuesday led by a third straight session of heavy selling in the country’s internet giants.
The slide echoed a nasty day’s trading on Monday.
The selloff was confined to China and Hong Kong markets alone again on Tuesday – Japan’s Nikkei rose 0.35%, and the ASX 200 added 0.54% and were not rattled by the slide.
Markets outside China and Hong Kong should not be hit by the selling – the causes are the growing loss of confidence in the Chinese government and its increasing authoritarianism and the crackdown in Hong Kong where civil liberties are being eroded and investors wonder when market commentary might be hit.
The Chinese and Hong Kong markets weaken noticeably in the afternoon, as did the key CSI 300 – the Chinese market measure that covers the top 300 stocks listed on the Shanghai and Shenzhen exchanges.
Its 3.5% drop yesterday takes the slide since the index peaked on February 21 this year to more than 18% – that puts it well into correction territory and approaching the lair of the bear – the only major global market measure in that situation.
MSCI’s broadest index of Asia-Pacific shares outside Japan again fell to its lowest level since mid-December, extending a low set the day before.
The Hong Kong Hang Seng Index fell 4.5%, its third day of declines and came after Monday’s 4.13% slump. The Shanghai market lost nearly 2.5%.
At one stage the Hang Seng was down by well over 5% as selling of Chinese internet stocks swamped buyers.
Shares in Alibaba lost more than 7%, Ten Cent shares lost close to 9% and shares in Meituan slumped close to 17%.
The fall in Alibaba and Meituan shares fell with investors expecting the companies’ food delivery arms to be affected by new regulations guaranteeing workers above-minimum pay.
Reuters pointed out that the Hang Seng Tech index lost more 8% on Tuesday to its lowest since its creation a year ago in July 2020. It has lost about 17% in three days and is down close to 50% from its February peak.
Driving the losses has been a growing list of crackdowns in the past two months from the central government which have undermined cryptocurrency miners, internet companies like Alibaba and Ten Cent, whacked Didi, the ride sharing company for daring to list in the US, hurt the after-school tuition sector and again targeted property developers.
At the same time the government has railed against speculation and illegal trading of government permits, such as those oil quotas, targeted commodity prices for copper, aluminium, lead and zinc in a blitz of public criticism and worse – including arrests and detention of leading business figures.
With that background, stockmarkets in China and Hong Kong have been sagging as local and foreign investors fear further arbitrary attacks and actions from the Communist Party directed mainland government.
It’s no wonder that investors are getting concerned and selling.
“The market seems to be uncertain whether there will be more policy changes for fintech, social media platforms, delivery platforms and ride hailing platforms,” said Iris Pang, chief economist for Greater China at ING.
“Each has their own issue and faces different regulatory actions, so the market is looking for ‘which technology sub-sector will be next?”
Beyond this, the looming results of the Federal Reserve meeting on Thursday is also been worrying markets with investors (again) looking for clarity about the central bank’s attitude to inflation and the tapering of its quantitative easing.
But before then quarterly results from Alphabet, Apple and Microsoft are out early Wednesday morning, Australian time.
