China's stock market faced significant challenges in 2023, and the downturn has intensified in the early weeks of the New Year. The Hang Seng Index in Hong Kong fell 2.3% on Monday, reaching its lowest level since October 2022. In the first month of 2024 alone, the index has lost over 12%, almost matching the total losses incurred throughout 2023.
On the mainland, China's Shanghai Composite Index experienced a substantial 2.7% decline, marking its most significant daily drop since April 2022. The Shenzhen Component Index, which heavily features tech stocks, had its worst day in nearly two years, plummeting 3.5%. Both indexes recorded losses of 4.8% and 7.7%, respectively, in the first few trading days of 2024.
This marks the worst start to a year for Chinese stocks since 2016, a period when investors were divesting their holdings following a market crash in 2015. The downturn in 2016 was a result of a bursting bubble, with the economy showing strain, and share prices outpacing company profits.
Recent challenges, including a real estate crisis, the slowest growth in decades (excluding the pandemic), and a regulatory crackdown on certain businesses, have contributed to a decline in investor confidence. Foreign investors, in particular, are reportedly reducing their risk exposure to China and harboring bearish expectations for business conditions in the country, according to Ken Cheung, chief Asian foreign exchange strategist for Mizuho Bank.
(With Agency Inputs)
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