China's Stocks Slide in Afternoon Selloff on Stimulus Jitters

(Bloomberg) -- Chinese stocks sank the most in six weeks as concern deepened about the prospect of the government scaling back stimulus.

The Shanghai Composite Index slumped 2.4 percent at the close, taking its loss this week to 4.5 percent. That would be the worst weekly performance this year. Telecom, technology and consumer discretionary shares led declines as more than 10 stocks dropped for each that gained. Bonds rose, with the yield on 10-year debt falling 1 basis point, while the yuan weakened to its lowest level since February against the dollar.

Sentiment toward Chinese equities has been undermined after last week’s Politburo meeting fueled concern the government will dial back economic support measures. Large-scale stimulus helped fuel the world’s biggest stock market rally in China this year, after economic worries plagued the nation’s shares in 2018.

"Concerns about a possible policy shift are hurting the market," said Zhang Gang, a Shanghai-based strategist with Central China Securities Co. "Investors can hardly find any sectors where they can make money, so they feel a strong urge to leave the market."

The declines in equities came even after People’s Bank of China Deputy Governor Liu Guoqiang said the central bank hasn’t changed its prudent monetary policy stance and has no intention to either tighten or loosen policy.

"It seems investors are rushing to sell their holdings to lock in profits, given the change in expectation about government stimulus," said Zhengyang Shen, a Shanghai-based strategist with Northeast Securities Co.

Upbeat earnings at the world’s most profitable distiller Kweichow Moutai Co. didn’t help as investors took profit following its more than 60 percent surge this year. It was one of the biggest drags on the Shanghai Composite on Thursday, along with financials including Industrial & Commercial Bank of China Ltd. and Ping An Insurance (Group) Co.

In Hong Kong, China Tower Corp. led declines on the Hang Seng China Enterprises Index as Bernstein & Co. downgraded the stock citing its high valuation. The stock was until Wednesday the best performer on the gauge this year. Other top gainers this year were among Thursday’s biggest decliners, including Haitong Securities Co. and Great Wall Motor Co.

The equity gauge of Hong Kong-traded Chinese companies dropped 1.4 percent, while the benchmark Hang Seng Index slipped 0.9 percent. Geely Automobile Holdings Ltd. extended its drop as exchange data showed more executives cut their stakes in the company last week.

To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Richard Frost, Philip Glamann

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With assistance from Bloomberg