Shenzhen Stocks Enter Bear Market as New Economy Dreams Fade
(Bloomberg) -- Shenzhen’s stock index sank into a bear market as investors fled the home of China’s new economy companies.
The Shenzhen Composite Index dropped 3.2 percent on Friday, taking its loss since its November 2016 high to more than 20 percent. The gauge has struggled to recover since China’s 2015 equities bust as a deleveraging campaign drove up costs for smaller companies and investors sought blue chip state-owned firms listed in Shanghai.
China opened the Shenzhen bourse to the outside world in December 2016 with the start of an exchange link with Hong Kong. While some large-cap companies such as surveillance camera maker Hangzhou Hikvision Digital Technology Co. and liquor company Wuliangye Yibin Co. found favor with foreign investors, the broader market has been largely shunned.
It’s not hard to see why: at 26 times reported earnings, the gauge index is far more expensive than benchmarks in Shanghai and Hong Kong, while the stock collapse of former Internet star Leshi Internet Information & Technology Corp. illustrates the risks facing companies started by entrepreneurs, rather than the state.
The Shenzhen Composite closed at its lowest level since February 2016 on Friday.
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