Chinese shares fell for a fifth straight day, pushing a closely watched benchmark into a bear market, as geopolitical tensions simmer ahead of Donald Trump’s inauguration.
The MSCI China Index dropped 1.5 per cent on Friday (Jan 10), taking its decline from an Oct 7 close to 20 per cent. The CSI 300 Index of onshore Chinese shares was down 1.3 per cent and has lost more than 5 per cent in the new year.
Stocks have started 2025 on a weak note as investors brace for higher tariffs that may prolong China’s economic slowdown. The US blacklisted Tencent Holdings and Contemporary Amperex Technology last week for alleged links to the Chinese military, while the Biden administration is mulling over another round of curbs on the export of artificial intelligence chips. The moves have rekindled fears that tensions will only worsen under incoming president Trump.
“It reflects the numerous uncertainties going on with weakening macro numbers, Trump inauguration, currency pressure due to US dollar strength, and a lull in stimulus until Two-Sessions,” said Xin-Yao Ng, a Singapore-based investment director at abrdn. “I think fast money might stay away in the first quarter and wait for things to be clearer, especially Trump’s tariffs.”
A stunning rally in Chinese shares late last year lost steam as investors’ hopes of a more forceful fiscal stimulus didn’t bear fruit. While authorities have continued to roll out fresh support measures, they have been piecemeal in nature and far short of market expectations.
Pessimism about an economy mired in a housing crisis and deflationary pressures has continued. China’s consumer inflation weakened further towards zero in December, decelerating for a fourth straight month in a setback for the government’s bid to drive up demand.
In their latest efforts, authorities unveiled plans to subsidise more consumer products and boost funding for industrial equipment upgrades. The central bank also reiterated a pledge to lower interest rates and the reserve requirement ratio for banks “at an appropriate time” to promote growth.
There’s a lack of positive catalysts for the market given a likely lull in major policy announcements until China’s so-called Two Sessions annual legislative meeting in March. BLOOMBERG
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