(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 expected rise in tariffs.
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The CSI 300 (000300.SS) Index closed 2.9% lower on Thursday, its steepest first-day trading day decline since 2016. The Hang Seng China Enterprises (^HSCE) Index fell as much as 3.1%.
The losses suggest sentiment remains fragile even after Chinese stocks posted their first annual gain since 2020 last year. There is a lack of confidence about the country’s economic recovery, with the Caixin manufacturing survey coming in below expectations and Donald Trump’s threat of higher tariffs looming in the future. of his inauguration later this month.
A sharp decline in the CSI 300 during the last trading session of 2024 also pushed the gauge below the 60-day moving average, a closely watched technical threshold, likely to trigger further selling by some funds. Several major financial stocks, including the Industrial and Commercial Bank of China and the Agricultural Bank of China, traded ex-dividend, exacerbating the benchmarks’ losses.
“It is a bit worrying that investors are starting the new year on a cautious note as this comes after clearer stimulus signals from Beijing at the 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 effort from the authorities to change the conversation about the country’s deflationary dangers over 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, with investors waiting for a bigger stimulus to push the market higher.
After the Central Economic Work Conference in December, China signaled more government borrowing and spending in 2025, with a shift in policy focus to consumption, in a bid to repair the economy’s weak link as looming US tariffs threaten exports.
While the announcement has given investors hope that Beijing is determined to revive the economy, some market watchers 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 China exposure in their portfolios as they position for 2025, said Charu Chanana, chief investment strategist at Saxo Markets.