Chinese stocks in Hong Kong are facing a steep decline, reaching their lowest levels in nearly two decades due to a lack of fresh economic stimulus and market support measures. The Hang Seng China Enterprises Index fell by 2.6% on Monday, nearing a level not seen since 2005, making it one of the worst-performing key indexes in Asia. Tech giants like Meituan and Tencent Holdings Ltd. were among the biggest contributors to this downturn.
The continued drop in Chinese shares contrasts with the more optimistic state of Wall Street, where the S&P 500 Index hit a record high. China’s commercial lenders also decided to keep their benchmark lending rates unchanged instead of implementing more aggressive stimulus measures that investors were hoping for. This lack of catalysts, coupled with outflows to more attractive alternatives in the region, has contributed to the worsening stock situation in China and Hong Kong.
In mainland Chinese markets, the benchmark CSI 300 Index fell by as much as 0.9% on Monday, poised for a second straight day of losses. This ongoing decline has also increased pressure on snowball derivatives, structured products that may trigger widespread losses if certain thresholds are crossed. Overall, the factors driving the Chinese stock market decline include a housing slump, deflationary pressures, and Beijing’s reluctance to enact bold monetary and fiscal measures to spur growth, as well as uncertainties about US interest rates and concerns about regulatory oversight. According to Eva Lee, head of Greater China equities at UBS Global Wealth Management, the benefits of monetary easing by the People’s Bank of China have already been priced in, and more aggressive policies are needed to revive stocks.