Chinese markets plunged on Monday after a week-long national holiday, and a day after the People’s Bank of China injected more cash into the banking system in a move aimed at stirring economic growth in the country.
The Business Insider reported that the markets lost nearly 5% in market bloodbath as investors digested a week of bad news in a single day. Tech companies were among the biggest losers on Monday as the CSI 300 Index closed down 4.3% in Shanghai, to 3,290.90 points, its worst performance since February 2016.
China’s Yuan also dropped as much as 0.76% against the dollar Monday, its biggest drop since mid-August, as futures on ten-year sovereign bond fell 0.1 percent. The FTSE China A50 Index of large caps also went down almost 5%, its biggest selloff in two years, a week after the Hong Kong fell more than 4 percent.
The Shenzhen Composite lost more than 4% at the close of trading on Monday, while the Shanghai Composite lost 3.7 percent of its value, to 2,716.51 points, its largest one-day percentage since June 19.
Chinese investors were bombarded with negative news last week, including an intensified trade war between the US and China, an accusation that China spied on the U.S., a close call between a Chinese and a U.S. destroyer, a new North American trade deal that is highly likely to isolate China, and accusations of U.S. election meddling by the Asian giant.
The main driver of the Chinese markets downfall, however, appears to be a failure by investors to believe that the latest stimulus from the Central Bank of China will deter a looming economic slump in the country that is likely to be driven by the ongoing trade war initiated by President Donald Trump.
Chinese equity market rout spread south to Hong Kong affecting the benchmark Hang Seng Index that dropped 1.4%, to 26,202.57 points with Galaxy Entertainment Group Ltd., Sunny Optical Technology Group Co., and Country Garden Holdings Co. Tencent Holdings Ltd dropped 2%, below the key HK$300 level as it slumped for a seventh day, its longest losing streak since 2014.
Meanwhile, the Hang Seng China Enterprise Index which tracks Chinese companies on the Hong Kong exchange slid 1.3 percent. Chinese pharmaceutical stocks and consumer staples were the largest losers among all 10 industry groups on the CSI 300, going down by at least 4.6%.
Shanxi Xinghuacun Fen Wine Factory fell 8.1% to 43.47 yuan and Wuliangye Yibin slumped 6.6% to 63.48 yuan. Chongqing Zhifei Biological Products slid by the 10% daily limit to 44.06 yuan.
