Even the Big Investor Favorites Can’t Escape China’s Stock Rout

(Bloomberg) -- The market rout in China has become so severe that even favored large caps regarded as almost sure-fire bets are getting hammered.

The FTSE China A50 gauge of the largest mainland companies by market value closed Wednesday at its lowest level since July last year, having lost 5.5 percent in just three days. Kweichow Moutai Co., the world’s No.1 distiller by value, and fellow liquor maker Wuliangye Yibin Co. were among the worst performers, sliding more than 4 percent. Developers China Vanke Co. and Poly Real Estate Group Co. lost at least 4.5 percent.

The A50 index was the highlight of China’s stock market in 2017, climbing 32 percent, nearly five times the Shanghai Composite’s return. The tide has turned as a trade dispute with the U.S. reverberates across Chinese stocks, large and small, adding to concern over the impact of Beijing’s deleveraging drive. A weakening yuan has made matters worse.

“The yuan depreciation added to risk aversion sentiment in stocks,” said Shen Zhengyang, Shanghai-based strategist with Northeast Securities Co. “With the market being stuck in a weak trend, no one can escape a downward spiral.”

Foreign investors are among the big-cap deserters, according to Yuanta Securities Co. analyst Wang Qing, who said they’re worried stock returns won’t offset the effect of a sharply weakening yuan. Offshore investors sold net $176 million of China A shares via exchange links with Hong Kong on Wednesday, Bloomberg calculations based on daily quota usage show.

To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net;Amy Li in Shanghai at yli677@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Will Davies, Ron Harui

©2018 Bloomberg L.P.

With assistance from Editorial Board