The situation on the Chinese markets is getting worse and worse.
Since Monday, Chinese stocks have given up all the gains of the past four and a half years, the latest grim milestone in a difficult year for the world’s second-largest economy.
According to FactSet data, China’s CSI 300 index XX:000300 fell more than 1% to end Monday’s session at 3,474.24, its lowest close since Feb. 21, 2019. In U.S. dollar terms, the index has been at 3,474.24 since the start of 2023 fell by almost 15%. The index includes stocks traded in Shanghai and Shenzhen.
Investors sold Chinese stocks on Monday amid reports in the domestic press that Foxconn 2354, -2.19% , a key supplier to Apple Inc. AAPL, -0.13% , had some of its mainland offices raided by tax authorities be. The company, officially known as Hon Hai Precision Industry Co., is based in Taiwan. In response, stocks plunged.
See: Chinese tax authorities recently raided Apple supplier Foxconn
The weakness of the Chinese markets is not just limited to stocks. China’s currency, the yuan, has lost sharply in value since the beginning of 2023. The yuan traded in China’s domestic markets hit its lowest level against the U.S. dollar since December 2007 last month, although it has remained more or less stable since then as Beijing has struggled to stave off further devaluation, currency strategists said.
The yuan USDCNY, -0.02% traded at 7.3 to the U.S. dollar on Monday, and the greenback has gained more than 6% against its Chinese rival since the start of the year.
According to the US Treasury Department, a team of strategists at Rabobank said that interventions in the foreign exchange market were one of the reasons why Chinese investors dumped US stocks and bonds in August at the fastest rate in four years.
See: China is dumping most U.S. securities in four years, perhaps to defend a weakening yuan
Also: Reports that China is dumping government bonds are greatly exaggerated
Chinese markets have struggled as the world’s second-largest economy reopened this year after a series of strict COVID-19 lockdowns. Concerns about slowing economic growth, potential systemic risks from struggling real estate developers and a deepening geopolitical divide between Washington and Beijing have prompted foreign investors to withdraw money from Chinese markets at a record pace, according to data from Northbound Stock Connect, which allows foreign investors access to Chinese markets via Hong Kong.
Data analyzed by a team of macro strategists at MUFG Bank showed that foreign investors sold a net $3.1 billion worth of Chinese stocks as of Oct. 17, up from $5.1 billion in September and more in August when $10 billion was drained.
China’s economy grew by 4.9% in the third quarter compared to the same period last year. That was slower than the previous quarter’s growth rate, but stronger than many economists had expected.
The weakness in Chinese stocks also impacted trading in the U.S., where several popular exchange-traded funds tracking Chinese markets saw a sell-off. The KraneShares CSI China Internet ETF KWEB fell 2.4% shortly after the U.S. market opened. Meanwhile, the iShares MSCI China ETF MCHI was also trading lower.
Stocks traded in Hong Kong also fell, with the Hang Seng Index HSI00, -0.68% falling 0.7% to 17,172.13.
U.S. stocks also traded lower on Monday, with the S&P 500 SPX falling 0.3%, while the yield on the 10-year Treasury note BX:TMUBMUSD10Y briefly exceeded 5% for the first time since 2007.
Source : www.marketwatch.com