(Bloomberg) — Chinese stocks posted their worst start to a year in nearly a decade as investors braced for economic uncertainty with weaker-than-expected manufacturing data and an expected increase in tariffs.
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The CSI 300 (000300.SS) The index closed down 2.9% on Thursday, its steepest drop on the first day of trading since 2016. The Hang Seng China Enterprises (^ HSCE) Slip index as much as 3.1%.
The losses suggest sentiment remains fragile even after Chinese equities last year posted their first annual advance since 2020. Confidence is lacking over the country's economic recovery, with the Caixin manufacturing survey below the estimates and Donald Trump's threat of higher tariffs loom large. of his inauguration later this month.
A sharp drop in the CSI 300 in the last trading session of 2024 also pushed the gauge below the 60-day moving average, a closely watched technical threshold, which is likely to lead to further selling by some funds. A number of major financial stocks including Industrial and Commercial Bank of China and Agricultural Bank of China were trading pre-dividend, compounding the benchmarks' losses.
“It is somewhat worrying that investors are starting the new year in a cautious manner as this comes after clearer stimulus signals from Beijing during its policy meetings in December,” said Homin Lee, senior macro strategist at Lombard Odier. “The underlying momentum for China remains quite fragile, and it will take some efforts by the authorities to change the conversation on the country's medium-term deflationary risks.”
Although Chinese stocks rose 15% last year in a rare annual gain, the bulk of the gains came in the weeks following the stimulus blitz at the end of September. Since then the market has been trading range bound, with investors waiting for a more significant stimulus to drive the market higher.
Following the Central Economic Work Conference in December, China signaled increased borrowing and public spending in 2025 with a shift in policy focus to consumption, in an effort to repair the economy's weak link as looming US tariffs threaten exports.
While that announcement gave investors hope that Beijing is determined to revive the economy, some market watchers note that there will be a lull in stimulus until March when the so-called Two Sessions—China's annual legislative session— happens.
Traders may want to limit China exposure in their portfolios as they position for 2025, according to Charu Chanana, chief investment strategist at Saxo Markets.