Chinese stocks fall to end wild week as traders price new fact

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(Bloomberg) — Chinese stocks tumbled on Friday, capping a volatile week for investors struggling to price Beijing’s tightened regulatory grip after the defeat of the country’s main stock index pushed the country’s main stock index to the edge of a bear market.

The CSI 300 fell 0.8% on the day and 5.5% on the week, its worst since February. In Hong Kong, the Hang Seng Index, which earlier this week saw its biggest two-day loss since 2008, is down 1.4%. Shares of Alibaba Group Holdings Ltd. fell 4.2 percent, while Mituan lost 5.9 percent. Tencent Holdings Ltd. declined. 2.6%.

Investors are grappling with an uncertain regulatory landscape, given the range of industries the government is targeting. From the derailment of the Ant Group’s groundbreaking IPO, to rules limiting monopolistic practices across the internet space, reducing leverage in the real estate industry and reforming the tutoring sector, investor guidebook continues to change rapidly. About $1.5 trillion in market capitalization has evaporated in those sectors since February, according to data compiled by Bloomberg.

It’s the fear of the unknown,” said Justin Tang, head of Asia research at United First Partners. “Market sentiment is on thin ice. Investors may have expected more meat, but they only got bones on the details of urging the Chinese government to calm down.”

The sharp declines in the stock market this week were caused by China’s move to prevent large sections of the booming teaching industry from taking profits. It was the government’s most extreme step yet to rein in companies it blames for deepening inequality, increasing financial risks and challenging Communist Party control over key sectors of the economy.

The defeat that followed was fierce enough that Beijing indicated its unease. State-run media published a series of articles suggesting overselling, while the country’s securities regulator held a video conference with bank executives to deliver the message that education policies are not intended to harm companies in other industries.

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“Confidence has not fully recovered,” said Stephen Leung, CEO of UOB Kay Hian (Hong Kong) Limited. “Investors need further clarification from regulators to clarify these policy uncertainties.”

China’s central bank pumped a larger-than-usual 30 billion yuan ($4.6 billion) of cash into the financial system for the second day in a row. Analysts say the move is aimed at calming market nerves and ensuring ample money supply at the end of the month. The country’s sovereign bonds rose for the seventh consecutive week, posting their longest winning streak in more than three years, as stocks slumped and slower growth raised bets on monetary easing.

China’s CSI 300 Index closed 7.9% lower for the month, its worst performance since October 2018. The Hang Seng is down 9.9% for the period.

BNP Paribas lowered its weight rating for China to neutral from overweight in allocating the median model to Asia, excluding Japan. “We believe regulatory pressures can continue for the time being,” analyst Manishi Raichodhury wrote in a note dated Thursday. He added that Chinese technology devices, mobile games and stocks related to electric vehicles and new energy “can be relatively immune”.

Winners

Renewables and semiconductors were bright spots amid the rout, as the top 10 performers at CSI 300 this week tied for themes. Sungrow Power Supply has acquired a renewable energy equipment manufacturer and Wingtech Technology Co. , the power equipment manufacturer, increased more than 20%, as companies are seen as benefiting from China’s structural shift toward greater innovation.

The Star 50, which counts such companies as members, is up 1.8% in the past five days.

Meanwhile, Hang Seng Tech fell 2.6% on the day and 17% in the month, the most since October 2018. Friday’s decline was followed by a dip in US-listed Chinese stocks on Thursday, as investors looked at Didi Global Inc’s earlier gains. . Amid reports that the passenger carrier was considering going private.

(prices updates throughout)

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