SHANGHAI: Chinese stocks slumped an astonishing 23 percent in January, their worst month since the depths of the global financial crisis in 2008 and making the Shanghai exchange the world's worst-performing major market.
The confirmation of a multi-decade low in Chinese growth, questions over the government's ability to stave off a "hard landing" and capital flight have set a negative tone at the beginning of the year, analysts said.
The Shanghai Composite Index closed at 2,737.60 on Friday, the last trading day of the month, up on the day but plummeting 22.65 percent since the start of 2016, its worst month for seven years.
Shanghai has the worst year-to-date performance among international stock indexes tracked by the Wall Street Journal. Many analysts put support for the index at 2,500 points but warn trading will be volatile.
"The market fell this month due to weak economic fundamentals," Founder Securities analyst Guo Yanhong told AFP. "There are no big policy themes to drive the market up."
The world's second-largest economy grew 6.9 percent in 2015, its slowest pace in 25 years, the government said last week.
Fourth quarter gross domestic product (GDP) growth was 6.8 percent, the worst since early 2009.
For international investors, worries over stock turmoil and a weakening currency recall last summer, when the Shanghai index fell more than 40 percent from its peak and authorities shocked markets with a yuan devaluation.
The weakening economy has caused capital to storm out of China. Wall Street giant Goldman Sachs estimates a foreign exchange outflow of $97 billion in December alone. Bloomberg News gave a tally of a $1.0 trillion for all of 2015.
"For financial markets, uncontrollable capital outflows, not slower GDP growth, is the top concern," Wang Tao, head of China economic research at UBS, said in a report on Thursday.
The technology-heavy index of Shenzhen, China's second stock exchange, tumbled 26.83 percent in January.
- No fanfare -
The tens of millions of small investors who dominate trading in China have been alarmed by the fact the government has failed to aggressively shore up the stock market in January, in the way that it did in mid-2015.
Despite months of turmoil, the Shanghai market eked out a weak nine percent rise last year, saved only by an extraordinary government rescue package which included state funds buying up shares, contravening official pledges to let the market play a greater role.
"They have saved the market in previous routs with great fanfare. Now with the market dropping like this, they have stayed quiet," Haitong Securities analyst Zhang Qi told AFP.
The launch in early January of a stock market "circuit breaker", which aimed to curb volatility by stopping trading in the case of big swings, had the opposite effect by causing investor panic.
Regulators scrapped the mechanism after four days, but not before it twice closed the Shanghai and Shenzhen exchanges early and sparked frenzied rumours that the securities regulator would step down over the debacle.
Ahead of the traditional Lunar New Year holiday in February, the central bank has poured record amounts of funds into the financial system, including 100 billion yuan ($15 billion) on Friday alone, to relieve shortages.
Analysts have likened the recent fund injections to a loosening of monetary policy or a replacement of funds lost to capital outflows.
"The government just needs to make the economy better, which is what matters the most," said Guo of Founder Securities.
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