Chinese stocks in Hong Kong plunged as investors trimmed positions ahead of a long weekend, with disappointing earnings from electric-vehicle maker XPeng Inc. spurring a selloff in automobile shares.
The Hang Seng China Enterprises Index slid as much as 2.9%, heading for its worst week since early March. The gauge has fallen more than 18% since this year’s high and is on course to erase about half of its gains seen during the strong China reopening rally between November and January. XPeng lost as much as 9.6% to be the biggest loser on Thursday. Tech shares also dropped, with Meituan the biggest drag.
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An intensifying selloff in Chinese stocks underscores investors’ lack of confidence in the market. On the mainland, the benchmark CSI 300 Index extended losses after erasing all its gains for the year on Wednesday, as a weaker yuan and developers’ debt woes added to persistent worries over growth and geopolitics. A Bloomberg Intelligence gauge of builders’ shares was down for a 12th day.
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“Sentiment is extremely weak, driven by the dual effect of the depreciating yuan and a loss of hope for the property sector,” said Wang Mingli, executive director at Shanghai Youpu Investment Co. “Funds are starting to lose their calm as northbound selling continues, and it looks like its going to be a tough period for the economy.”
Foreign investors were net sellers of onshore stocks for a third straight day on Thursday. The CSI 300 fell as much as 1.1% while Hong Kong’s benchmark Hang Seng Index slid 2.6%. Hong Kong markets are shut Friday for a holiday.
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“With regards to mainland China exposure, it is back to where we were in October 2022,” HSBC Holdings Plc strategists including Herald van der Linde wrote in a note. “Global funds remain significantly underweight mainland China and Asia funds now move to a small underweight as well.”
Sentiment also worsened as the US debt-ceiling negotiations hit a fresh impasse. Negotiators were far apart on key issues, especially the spending cuts demanded by Republicans, spurring risk-off sentiment.
“The weakness in Hong Kong stocks recently is mainly due to worries over the US debt ceiling,” said Hayman Chiu, an analyst at Cinda International Holdings. “The market has been correcting from the second quarter following disappointing economic data and the US debt ceiling negotiations would be key to watch.”
--With assistance from April Ma, Mengchen Lu and Ishika Mookerjee.
