SHANGHAI: Chinese stocks slumped further on Friday, with the Shanghai benchmark index logging its worst week in five years amid signs of panic selling and forced liquidation of some trades.
The blue-chip CSI300 Index closed down 1.2% to hit a fresh low since January 2019, as policy support from the authorities failed to cheer up investors in an ailing economy.
The Shanghai Composite Index ended 1.5% lower and lost 6.2% for the week, the worst since October 2018.
“The market accelerated its bottoming trend despite the national team’s support,” said Yang Delong, chief economist at First Seafront Fund Management.
“Signs of forced liquidation of snowball derivatives and margin trading also accelerated the market’s decline and caused panic among some investors.”
In a sign that state-backed investors helped to stem the market slide, several blue-chip exchange-traded funds (ETFs) that are favoured tools by state fund Central Huijin saw heavy buying during the final hour of trading.
Dennis Yang, Professor of Business Administration at the University of Virginia Darden School of Business, said state-backed funds cannot revive investor confidence, either at home or abroad.
China stocks end mixed on policy support
“The short-term solution is unlikely to be sufficient for restoring long-term confidence among global investors without addressing the underlying issues in the Chinese economy,” Yang said.
Shares in healthcare, information technology, semiconductors and new energy slumped more than 3% each to lead the decline.
“Investor sentiment has stagnated since last week’s temporary excitement about potential policy shift,” said Morgan Stanley in a note.
“Market sentiment likely to stay range bound in the near term amid lukewarm macro data and quieter policy cycle ahead of holidays,” the broker said.
Hong Kong’s Hang Seng Index slipped 0.2% and the Hang Seng China Enterprises Index was down 0.1% at the close.
Shares in drug research and development group WuXi AppTec slumped 21% as its mention in a U.S. bill aimed at restricting access to Americans’ genetic data again raised geopolitical concerns.
Social media and gaming giant Tencent Holdings remained a bright spot. Its shares finished up 2.9% after China approved licences for 32 imported online games for 2024, including two titles to be published by Tencent.
“To further stabilize the market and enhance investor confidence, the government must implement more defined policies that outline key growth areas and capital allocation priorities for 2024,” said Xiaolin Chen, Head of International at KraneShares.