Five Charts Showing the Brutal Two-Day Selloff in China Stocks

  • Hang Seng Index’s RSI below 15 for first time since 1987
  • Foreign exodus from Chinese local shares reaches seventh day

This week’s meltdown in Chinese stocks is drawing comparisons with the rout seen during the global financial crisis, with the depth and breadth of the two-day selloff leaving investors few places to hide and little hope to hang on to.

All major Chinese equity gauges were in the red again Tuesday. An index tracking Chinese firms listed in Hong Kong plunged further after suffering its steepest loss since 2008 on Monday. The CSI 300 Index has trailed an Asian stock benchmark by four percentage points this week.

Growing worries that Beijing’s ties with Moscow could spark new U.S. sanctions on China saw investors dump shares despite the upbeat economic data released on Tuesday. Geopolitical concerns have added to risks posed by regulatory headwinds and widening Covid lockdowns in the country.

A slew of indicators are signaling further weakness for equities in China and Hong Kong. Here are five charts showing the magnitude of the latest rout:

The Shanghai Composite Index lost 5% Tuesday, its worst one-day decline since Feb. 3, 2020, when the initial outbreak of coronavirus in China spooked investors. The gauge, widely used by technical analysts as a sentiment indicator, saw less than 100 out of its nearly 1,800 members ending the day higher.

The Hang Seng Index has plummeted a combined 12% over the past three sessions and has rarely looked so oversold in its history. The read on the Hong Kong benchmark’s 14-day relative strength index, a measure of overbought or oversold conditions, dropped below 15 for the first time since the 1987 stock market crash in the U.S.

The breadth of declines for Hong Kong-listed Chinese stocks this week was jaw-dropping. On Monday for example, more than half of the companies constituting both the Hang Seng China Enterprises Index and Hang Seng Tech Index dropped to their 52-week low, Bloomberg-compiled data show. On the mainland, only 14 components of the CSI 300 managed to close higher.

Global investors offloaded a net 16 billion yuan ($2.5 billion) worth of local Chinese stocks Tuesday, the most since July 2020. This extended their selling streak to seven days, the second longest stretch since October 2020.

The Hang Seng Tech Index had a roller-coaster ride Tuesday, before closing at a record low. It fluctuated within a range of as much as 10 percentage points, the wildest swing ever since the gauge’s inception in 2020, Bloomberg data show.

Source: Bloomberg

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