China stocks extend losses on fear of economic downturn

HONG KONG: China and Hong Kong stocks fell on Wednesday for a fourth consecutive session as weak economic data and a deepening property sector crisis kept investors away.

China’s blue-chip CSI 300 Index dipped 0.73%, while the Shanghai Composite Index slid 0.82%.

Hong Kong’s Hang Seng Index dropped 1.36%, and the Hang Seng China Enterprises Index declined 1.47%.

China’s July new home prices fell for the first time this year, official data showed on Wednesday, as piecemeal policy support failed to shore up the embattled property sector, which accounts for about a quarter of the country’s economic activity.

Data on Tuesday showed China’s July property investment slid for the 17th consecutive month.

Barclays late on Tuesday further cut its growth forecast for the country’s 2023 gross domestic product (GDP) to 4.5%. Contagion fears are growing this week as a major wealth manager in China, Zhongrong International Trust, misses dozens of payments. The firm has a sizeable real estate exposure.

“Chinese stocks may be in a holding pattern,” said David Chao, global market strategist for Asia Pacific (ex-Japan) at Invesco.

Investors may not come back until economic data starts to improve sequentially or when broad-based stimulus measures are announced, such as a household fiscal transfer or a meaningful relaxation of property restrictions in tier-1 cities, Chao said.

Foreign capital logged a eighth straight day of outflows via the northbound trading link on Wednesday.

Global hedge funds “aggressively” sold Chinese stocks recently amid heightened concerns over the country’s property sector and a weak batch of economic data, a Goldman Sachs report showed.

Sector-wise, Hong Kong-listed Chinese tech firms extended losses, dropping 1.3%.

Among mainland A-shares, the artificial intelligence (AI) sector dropped over 3% to lead declines, while the real estate sector was up 1.8% on stimulus hopes.

Meanwhile, foreign holdings in China’s onshore yuan bonds also declined in July, official data showed, due to the interest rate differential between China and the US and investors’ disappointment with the policy response so far.