Bloomberg News December 20, 2021

  •  Hang Seng China Enterprises Index drops to February 2016 low
  •  Setback to U.S. bill, possible northbound curbs hurt sentiment

Chinese shares broadly tumbled as investors were spooked by a setback for a U.S. bill that had been expected to boost climate spending, and Beijing’s plan to bar mainland traders from a stock link with Hong Kong.

Hong Kong’s Hang Seng China Enterprises Index fell 2.1% to a fresh five-year low, while the ChiNext Index closed 3% lower on the mainland, the steepest decline since late July. A Bloomberg gauge of China real estate developers lost 3.2% to the lowest since February 2017. 

Tech-heavy ChiNext sees worst day since a July selloff

The slide tracks a selloff across the Asia-Pacific region, with the MSCI Asia Pacific benchmark down as much as 2%, as investors fretted over fresh lockdowns to slow the new omicron variant. U.S. senator Joe Manchin’s shocking rejection of President Joe Biden’s economic plan that promised a record $550 billion funding to tackle climate change added pressure ahead of the Christmas holiday.

Also hurting Chinese shares was a plan by the country’s securities regulator to toughen restrictions on mainland investors trading onshore equities via the links with Hong Kong to tackle “fake foreign investors.”

“Today’s drop has been exacerbated by the regulations curbing ‘fake foreign fund’ inflows through the links, and concerns about the U.S. Market,” said Zhang Fushen, an analyst at Shanghai PD Fortune Asset Management. “The stocks falling the most today are also those most favored by momentum traders and those seeking cheaper leverage via the link.”

Electric vehicle battery makers Contemporary Amperex Technology Co. and Eve Energy Co. each fell at least 5.5%, the biggest contributors to point losses in both the ChiNext and China’s benchmark CSI 300 Index. They were followed by solar firm Sungrow Power Supply Company, which slumped 6.1%. The CSI 300 Index slipped 1.5%.

Chinese stocks traded in Hong Kong are already the worst performing major benchmark globally this year, hammered by Beijing’s crackdown on private enterprise. The Hang Seng China Enterprises Index is down more than 25% this year through Monday, on track for its worst year since the 2008 financial crisis.

— With assistance by Catherine Ngai, and April Ma