A key gauge of Chinese stocks erased all its gains for the year, weighed down by uncertainty over the economic outlook and a lack of fresh catalysts from the ongoing National People’s Congress.
(Bloomberg) — A key gauge of Chinese stocks erased all its gains for the year, weighed down by uncertainty over the economic outlook and a lack of fresh catalysts from the ongoing National People’s Congress.
The MSCI China Index slumped as much as 2.5% on Friday to its lowest since Dec. 22 as tech and financial shares led the declines. The gauge is down almost 17% from this year’s high in late January.
The offshore yuan, while advancing slightly Friday, has weakened 1.1% versus the greenback since NPC kicked off, nearing the psychological level of 7 per dollar.
Mixed economic data has dented optimism over China’s recovery in recent weeks after the nation’s reopening from Covid Zero curbs sparked a sharp three-month surge through January. Expectations for more policy stimulus were dashed this week after Premier Li Keqiang announced a growth goal of around 5% for this year, below most estimates.
“The key issue to monitor in the Chinese economy in the immediate months ahead will be the recovery, or the lack of it, in the residential property market,” Christopher Wood, global head of equity strategy at Jefferies Financial Group Inc., wrote in a note. “Base case on recent market action in China-related equities is a pause to refresh before the next upleg.”
READ: China Property Stocks Enter Bear Market as Policy Optimism Fades
Declines were broad-based. JD.com Inc. was among the biggest drags on the MSCI China gauge and weighed on tech sentiment, dropping as much as 12% in Hong Kong as the firm cautioned a consumption recovery will take time. A gauge for Macau casino stocks was having its worst day since Jan. 30.
“The comments on China consumers being cautious and a downbeat Q1 revenue guidance from JD.com’s management are weighing on the market,” said Redmond Wong, strategist at Saxo Capital Markets.
A lack of major stimulus measures for consumption and property at the NPC — which was being expected by the likes of Fidelity International and abrdn plc — has led to a selloff in those sectors, with a gauge of real estate shares sinking deeper into a bear market reached on Thursday.
READ: China’s Consumer Spending Is Showing Signs of Strong Rebound
The CSI 300 index of onshore stocks dropped 1.3% as foreigners were net sellers for a fourth straight session via trading links with Hong Kong. Weak Chinese consumer price inflation data on Thursday added to caution about the strength of the economic recovery.
Hong Kong’s Hang Seng Index also erased its advance for the year and tumbled as much as 3.2%. A gauge of Chinese tech shares trading in Hong Kong fell more than 4%, poised to lose about 10% for the week.
As the reopening optimism faded, the MSCI China measure was on track for its biggest weekly loss since end October. China’s 10-year government bond yield was set for a weekly decline of 4 basis points, the most since late December.
“There was little enthusiasm for some of the announcements emanating from the NPC,” Kiyong Seong, lead Asia macro strategist at Societe Generale SA in Hong Kong, wrote in a note. “With no major positive surprises from the NPC, however, the CNY will likely lag Asia FX’s recovery from the recent sell-off driven by the repricing of Fed rates.”
(Updates market prices.)
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