China Stocks Post Biggest Loss in Three Weeks on U.S. Tensions

(Bloomberg) -- Chinese stocks slumped, led by biotech shares, amid growing concern over U.S.-China relations.

The CSI 300 fell 1.5% at the close, the largest decline in nearly a month. The tech-heavy ChiNext gauge slumped 3.3% as investors sold out of this year’s biggest winners before price limits on the gauge double Monday. Hong Kong’s Hang Seng Index lost 0.7% on a day when trading was limited to the afternoon because the morning session was canceled due to a typhoon.

Investor confidence took a hit as disputes between Washington and Beijing have escalated. On Tuesday, President Donald Trump said he called off trade talks with Beijing, throwing into question an agreement the two countries reached earlier this year. Also, the U.S. asked universities to divest from Chinese holdings in their endowments. Just a month ago, mainland stocks jumped to a five-year high amid optimism over the nation’s economic recovery.

“Overseas traders’ risk appetite is still impacted” by the China-U.S. tensions, said Wan Kelin, an analyst at Huaxi Securities Co. This afternoon, “there was concentrated selling from northbound traders that exacerbated the drop.”

Health-care companies led declines as investors took profit, with vaccine makers Walvax Biotechnology Co. and Chongqing Zhifei Biological Products Co. losing at least 9.5%. A subgauge of health shares slid 3.3% as the worst performer among the CSI 300’s 10 industry groups.

Health-care companies have been among the best performers in China this year on bets the coronavirus outbreak will fuel demand for products like vaccines. That has helped send the Nasdaq-like ChiNext to a gain of 45%, beating the world’s major indexes. The measure will soon see wilder swings because shares listed there will be allowed to rise or fall 20% a day -- double the current cap -- from Monday.

The slump in stocks failed to lift sentiment in the fixed-income market. The yield on one-year government bonds rose 17 basis points, the most since July 24, as a sovereign note auction on Wednesday reflected sluggish demand for the debt.

The yuan rose as much as 0.27% to 6.9034 versus the greenback, its strongest level since Jan. 22.

©2020 Bloomberg L.P.

With assistance from Bloomberg