China Stocks Drop to Five-Month Low on Property Rout, Virus Woes

  • CSI 300 Index slides 1.6% to its lowest close since July 28
  • Consumer, infotech shares among biggest drags on the benchmark

China’s stock benchmark slid to its lowest in more than five months as a selloff in the nation’s property sector and concerns over a broadening omicron spread soured investor sentiment.

The CSI 300 Index lost 1.6% to close at its weakest since July 28, with liquor maker Kweichow Moutai Co. being the biggest drag. Real estate developers extended declines in afternoon trading amid a Bloomberg report that several of China’s biggest banks have become more selective about funding real estate projects by local government financing vehicles.

“Blue chip names resumed their drop, which weighed on the broader index,” said Ken Chen, an analyst at KGI Securities Co. “We still need to see better economic data amid the property sector stimulus and the worsening Covid spread also added pressure.”

China detected omicron in a second major port city, deepening concern that the vastly more infectious variant could spread quickly across the world’s largest trading nation, upending global supply chains.

Local equities have had a poor start to 2022 after last year capping their worst annual performance since 2018.

Foreigners Sell

Losses resumed on Thursday after the CSI gauge climbed 1% in the previous session, the most in about a month. That was in part due to expectations for the People’s Bank of China to cut interest rates, which would add further liquidity to the market at a time when global central banks including the Federal Reserve are moving toward withdrawing pandemic-era stimulus.

China’s slowdown probably extended into end-2021, with growth falling below 4% year on year in the fourth quarter, according to Bloomberg Economics. Data on growth and December retail sales and industrial output is due Monday.

Overseas investors net sold almost 600 million yuan ($94.3 million) worth of mainland equities on Thursday. The tech-heavy ChiNext Index slipped 1.7%. In Hong Kong, the benchmark Hang Seng Index was down 0.2% as of 3:37 p.m. local time, while the Hang Seng Tech Index lost 2.1%.

Meanwhile, China’s overnight repurchase rate climbed 25 basis points to 2.23%, the highest since October.

Source: Bloomberg

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