Chinese stocks fell in the worst start to a year since 2016

(Bloomberg) — Chinese stocks posted their worst start to a year in nearly a decade as investors braced for economic uncertainty with weaker-than-expected manufacturing data and an anticipated increase in fees

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The CSI 300 (000300.SS) Index closed down 2.9% on Thursday, its steepest fall in the first trading day of a year since 2016. The Hang Seng China Enterprises (^ HSCE) Index slid as much as 3.1%.

The losses suggest that sentiment remains fragile even after Chinese companies posted their first annual advance last year since 2020. There is a lack of confidence about the country’s economic recovery, with the survey of Caixin’s manufacturing coming in below estimates and Donald Trump’s threat of higher tariffs looming far ahead. of its inauguration later this month.

A sharp drop in the CSI 300 in the last trading session of 2024 also pushed the gauge below the 60-day moving average, a careful technical limit, likely leading to more selling by some funds. Several major financial stocks including Industrial and Commercial Bank of China and Agricultural Bank of China traded ex-dividend, compounding the benchmarks’ losses.

“It is somewhat worrying that investors are starting the new year cautiously, as this comes after clearer stimulus signals from Beijing during its December policy meetings,” said Homin Lee, senior macro strategist at Lombard Odier. . “The underlying momentum for China remains quite fragile, and it will take some efforts by the authorities to change the conversation about the country’s medium-term deflationary dangers.”

While Chinese stocks rose 15% last year in a rare annual gain, most of the rise came in the weeks following a stimulus blitz in late September. Since then, the market has been trading range-bound, with investors waiting for more significant stimulus to drive the market higher.

After the Central Economic Work Conference in December, China signaled more public borrowing and spending in 2025 with a shift in policy focus to consumption, in an effort to repair the weak link of the economy as looming US tariffs threaten exports.

While the announcement gave investors hope that Beijing is determined to revive the economy, some market observers note that there will be a lull in the stimulus until March, when the so-called Two Sessions – the session China’s annual legislative session – takes place.

Traders may limit China exposure in their portfolios as they look to 2025, according to Charu Chanana, chief investment strategist at Saxo Markets.

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