More than $560 billion in market value has been wiped off Hong Kong and mainland China exchanges in a week as funds capitulate out of once favoured stocks, unsure which sectors regulators will target next.
Chinese companies listed in the US are on pace for their longest losing streak in more than a decade after Beijing intensified its regulatory clampdown across various industries this week.
American depositary receipts for tech giants have racked up losses with Tencent Holdings, Alibaba Group, and Nio erasing more than 9% each this week.
The declines have sent the Nasdaq Golden Dragon China Index to lose nearly 8% of its value, wrapping up two months of declines. It gained 2.6% on Friday as China’s securities regulators vowed to create conditions to push for cooperation with the US on companies’ audit and supervision.
In the span of just six months, the Nasdaq Golden Dragon China Index, which tracks 98 firms listed in the US that conduct a majority of their business in China, has plunged about 51%.
Chinese state media called for tougher oversight to protect consumers, hurting liquor makers, cosmetics firms and online pharmacies. The Hang Seng Index plunged to enter a technical bear market as regulatory crackdowns spread across industries. This comes after policymakers in China released a fresh round of proposed regulations to further ensure the rights of drivers who work for online companies and to step up oversight of the live streaming industry.
“There isn’t really one trigger, but many bits and pieces that add to the narrative to stay away from China,” said Dave Wang, a portfolio manager at Nuvest Capital in Singapore. “Almost on a daily basis you have negative news coming out, so it forms the impression there’s no end in sight.”
This week alone China announced tougher rules on competition in the tech sector, summoned executives at property developer Evergrande to warn them to reduce the firm’s massive debt and state media reported looming regulations for liquor makers, a favourite tipple for foreign fund managers.