Chinese equities plunged for 6th session led by small-cap stocks
Vrasidas Neofytou
Head of Investment Research
The new trading week has started with drama for Asian investors following fresh turmoil in Chinese equities, which has the potential to surprise global markets if Chinese authorities fail to contain it through an economic rescue campaign.
Most of the Chinese equities hit a new five-year low after slumping for a sixth straight trading session, driven by losses in property and tech stocks amid persistent concerns over slowing economic growth in the country.
Chinese stocks fell across the board.
In this context, the blue-chip CSI300 Index tumbled as much as 2.1% to refresh a five-year low before closing higher on promises of more stimulus measures from the Chinese government, while the Shanghai Composite Index slumped as much as 3.5%, after tumbling 6.2% last week. (Source: www.reuters.com)
Yet, it was the small-and-micro-cap companies that led the selloff as the small-cap indices CSI 1000 and CSI 2000 crashed as much as 8% and 10% during the trading session, halting trading for 30% of its stocks.
The CSI 1000 year-to-date losses stood at nearly 27% at the time of writing, while it sank to the lowest level since 2018, with as many as 990 of the 1000 companies on the index in the red.
China's market capitalization has sunk by just over $1 trillion in the space of 13 trading days, dragging the total value of the nation’s equities under $8 trillion on Friday, from just above $9 trillion on Jan. 16.
Chinese and global investors’ pessimism worsened on Monday following the lack of a clear signal for policy support. Over the weekend, China's securities regulator declared to prevent abnormal market fluctuations, but announced no specific measures, failing to prevent the selloff across the board.
Adding to the drama following the bankruptcy of China’s second-largest property giant by sales, Evergrande, ex-U.S. President Donald Trump said that he was considering a flat 60% tariff on Chinese goods imports in case of a second presidency term. (Source: www.cnbc.com)
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