China Stocks Lead Global Losses as Tech Rout Hits Fragile Market

(Bloomberg) -- Chinese stocks were the world’s worst performers Tuesday, falling the most this month, and Hong Kong’s November rebound came unstuck.

The CSI 300 Index slid 2.3 percent, with technology shares leading declines after another sell-off in the U.S. That also dragged on Hong Kong’s Hang Seng Index, which lost 2 percent as all but two of its 50 members declined. Internet giant Tencent Holdings Ltd. retreated 3.3 percent.

Investors in China have been stung by a myriad of factors this year, including a trade war with the U.S. that has helped send the equity benchmark down 20 percent. Uncertainty continues to swirl around the dispute and whether any progress will be made when presidents Xi Jinping and Donald Trump meet on the sidelines of the G20 in Buenos Aires.

China Stocks Lead Global Losses as Tech Rout Hits Fragile Market

“The market was affected by the decline in the U.S. stocks today and people are very cautious before the Trump-Xi meeting in general,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities. “People tend to sell once they have had small gains. I would expect the Hang Seng Index to fluctuate between 25,000 and 26,200 in the coming two weeks or so.”

The decline in Hong Kong stocks threatens to derail what had been a fairly dramatic comeback this month. The Hang Seng Index advanced 5.6 percent in November through Monday, rebounding from its worst streak of monthly losses in 36 years. It closed at 25,840.34 points on Tuesday.

The benchmark’s worst performer was CSPC Pharmaceutical Group Ltd., which fell 5.3 percent. While analysts still overwhelmingly recommend buying the drug maker, Chinese investors sold HK$45 million of its shares via the Shanghai trading connect on Monday, Bloomberg calculations based on turnover show, making it one of the most sold Hong Kong stocks via the southbound link.

Traders in Hong Kong have barely had a moment of calm in 2018. Tuesday’s decline was the 15th time this year the benchmark has lost 2 percent or more, the most since 2011. Last year, drops of that magnitude happened only twice.

The losses show how most problems afflicting global investors in 2018 have found a foothold in Hong Kong. Its largest companies generate the majority of their sales from a slowing China, while the city’s dollar peg ties it to tightening U.S. monetary policy.

On the mainland, the ChiNext gauge of small caps and tech stocks fell 2.8 percent, its biggest loss since Oct. 11. The measure rallied into November and during last week as the government pledged to improve funding access for smaller, private companies, but it is still down 29 percent since the end of March.

“Stocks, especially small caps, recorded decent gains in the past month, mainly driven by speculative money after China pledged to cut trading barriers,” said Sun Jianbo, president of China Vision Capital Management in Beijing. “When speculative traders sense a smell of danger, they’ll exit and outrun anyone else. The market is on shaky ground and investors tend to lock in profits when gains accumulate.”

Among individual movers, surveillance-product maker Hangzhou Hikvision Digital Technology Co. slid 8.7 percent following news the U.S. may tighten controls on the export of Artificial Intelligence tools. Hong Kong-listed luxury watchmakers including Chow Tai Fook Jewellery Group Ltd. fell after Bank of America Corp. warned of weakening demand from Chinese consumers.

©2018 Bloomberg L.P.