(Bloomberg) — Chinese stocks posted their worst start to the year in nearly a decade, as investors braced for economic uncertainties with weaker-than-expected manufacturing data and an anticipated increase in tariffs.
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The CSI 300 Index (000300.SS) closed down 2.9% on Thursday, its steepest drop on the first trading day of the year since 2016. The Hang Seng China Enterprises Index (^HSCE) fell as much as 3 .1%.
The losses suggest sentiment remains fragile even after Chinese stocks posted their first annual advance last year since 2020. There is a lack of confidence in the country’s economic recovery, with the Caixin manufacturing survey missing estimates. and Donald Trump’s threat of higher tariffs looming in the future. of his inauguration at the end of this month.
A sharp decline in the CSI 300 in the last trading session of 2024 also pushed the indicator below the 60-day moving average, a closely watched technical threshold, which is likely to lead to more selling by some funds. Several major financial stocks, including Industrial and Commercial Bank of China and Agricultural Bank of China, traded without dividends, exacerbating losses in benchmark indices.
“It’s a bit 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 policymakers to shift the conversation around the country’s deflationary dangers in the medium term.”
While Chinese stocks rose 15% last year in a rare annual gain, most of the gain came in the weeks after a stimulus blitz in late September. Since then, the market has been trading within a range, and investors are hoping for more significant stimulus to push the market higher.
Following December’s Central Economic Work Conference, China signaled higher public borrowing and spending in 2025 with a shift in policy focus toward consumption, in an effort to repair the economy’s weak link as U.S. tariffs threaten exports.
While that announcement has given investors hope that Beijing is determined to revive the economy, some market observers note that there will be a pause in stimulus until March, when the so-called Two Sessions (China’s annual legislative session) take place. ).
Traders may want to limit exposure to China in their portfolios as they position themselves for 2025, according to Charu Chanana, chief investment strategist at Saxo Markets.