The Hang Seng Index extended this week’s losses to head for a bear market even as the Chinese state media sought to reassure investors shaken by Beijing’s regulatory crackdown.
Hong Kong’s stock benchmark fell as much as 1%, taking declines from its recent Feb. 17 peak to 20%. The CSI 300 Index, which is also approaching a bear market, was down 0.2% after swinging between gains and losses earlier in the session.
Chinese state media talked up the market after a wave of selling that had seen nearly US$1.5 trillion of market value wiped off Hong Kong and mainland shares in the three trading days through Tuesday, according to Bloomberg-compiled data. Investors have dumped stocks in the crosshairs of Beijing’s sweeping regulatory crackdowns, with selling also spreading to bond and currency markets.
Meituan, which had seen its stock hammered amid China’s new regulations on the food delivery sector, erased a gain of as much as 12%. Tencent Holdings slid 4.7%, extending Tuesday’s 9% plunge. The Hang Seng Tech Index was down 0.3% after gaining as much as 3.9%.
Recent declines are unsustainable and the market will stabilize quickly, the Securities Daily reported, citing fund managers. The slump has “to an extent, reflected the misreading of policies and venting of sentiment by some funds,” wrote the Securities Times in a front page editorial, adding that economic fundamentals are unchanged and the market may stabilize at any time.
Panic Selling
The jawboning follows dramatic market moves that underscored the fragility of investor confidence amid a months-long regulatory onslaught by Beijing. Traders fear the latest crackdown on the nation’s education, tech and property sectors could expand to other industries such as health care, as China looks to tighten its grip on Big Tech and reduce the wealth gap. The government has targeted private enterprises it blames for exacerbating inequality and increasing financial risk.
Elsewhere, the China Securities Journal echoed other publications in saying there was no systemic risk, and cited domestic mutual and private fund managers saying that there is no need for investors to be overly pessimistic. The Shanghai Securities News also carried a piece citing analysts that the decline has brought buying opportunities in quality stocks.
“While adjustment of polices in some industries may affect their current business model, it will be beneficial toward unleashing more social vitality in the mid-to-long term and aid consumption in most other areas,” the Securities Times said, adding that overall valuations in A shares are reasonable.
“There has been panic in some sectors more than others in recent days, and the important thing is to keep emotions in check,” said Du Kejun, fund manager at Beijing Gelei Asset Management Center LP, adding that he would consider buying EV firms and chipmakers if the dip continues.
