China Stocks Tumble Toward 15-Month Low as Stimulus Bets Unwind
Chinese stocks sank, with the benchmark index approaching the lowest level since November 2014, as some investors were disappointed by a lack of specific measures to boost growth during the Group of 20 meeting in Shanghai.
The Shanghai Composite Index dropped 3.5 percent, after tumbling as much as 4.4 percent earlier. Declines were led by commodity producers and technology companies. The measure has lost 25 percent this year, the worst performer among 93 global equity gauges, on concern capital outflows will accelerate as the economic slowdown deepens. The yuan headed for its longest losing streak this year.
Investors had hoped the government would announce measures to bolster the economy over the weekend, said Ronald Wan, chief executive officer at Partners Capital International Ltd. in Hong Kong. There are also increasing signs funds are shifting from equities to housing, according to Steve Wang, chief China economist at Reorient Financial Markets Ltd.
"Investors feel disappointed over the lack of good news from the G-20, while the yuan has started to weaken again," Wang said in Hong Kong. "There are signs of panic buying in China’s property market as prices in large cities continue to rise. A hazy economic outlook prompted some people to sell shares and buy homes, while many stocks remain overvalued."
Home prices in Shenzhen jumped 4 percent in January from a month earlier, taking gains over the past 12 months to 52 percent, the statistics bureau said last week. Prices in Shanghai increased 2.2 percent in that month and are up 18 percent over the past year. The outstanding balance of margin debt on the Shanghai Stock Exchange fell to its lowest level since November 2014 on Friday.
The Shanghai Composite has fallen 2.7 percent in February, after a 23 percent plunge in January. Volatility is returning to Chinese stocks, with a gauge of 50-day price swings climbing to the highest levels since November. The Hang Seng China Enterprises Index slid 1.4 percent, poised for a fourth straight monthly decline. The Hang Seng Index lost 1 percent.
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China is due to release its first gauge of economic strength for February on Tuesday with the release of the Purchasers’ Manufacturing Index. The measure probably remained unchanged at 49.4 from a month earlier, according to the median estimate in a Bloomberg survey. Readings below 50 indicates contraction.
"Before the G20 meetings, people expected stabilization policies and the central bank to make statements but not too much happened," Partners Capital’s Wan said. "People tend to cash out before the parliamentary meeting."
The China Securities Regulatory Commission may shelve the overhaul of initial public offering processes and the start of the Shenzhen-Hong Kong exchange link as new chairman Liu Shiyu’s priority will be promoting stability rather than reforms, the South China Morning Post reported, citing unnamed "industry insiders".