(Bloomberg) -- China’s equity benchmark is on the cusp of a technical bear market, as global market swings add to investor concerns over the nation’s slowing economy and regulatory headwinds.
The CSI 300 Index has dropped more than 19% from a Feb. 10 peak, coming within striking distance of a 20% drop. The gauge slumped the most since July on Tuesday following wild swings in the U.S. market as anxiety ran high ahead of Federal Reserve’s meeting, where officials are expected to signal a March rate hike.
Chinese stocks have started the new year with losses even as authorities doubled down on their pledge to support growth, cutting multiple interest rates. Much like 2021, tech and property sectors have been among the hardest hit in the recent selloff, with a shift away from last year’s winners adding to market swings.
“Overall, a sense of caution prevails,” said Wai Ho Leong, a strategist at Modular Asset Management. This reflects “increased wariness given that we are entering a period of thinner liquidity over the Lunar new year. There is also a desire for more clarity over the policy response to perceived property default risks,” he said.
It is not appropriate for investors to overreact to the A-share selloff Tuesday as the stock market still enjoys solid support in terms of policy and capital, Shanghai Securities News said in a front-page report, citing experts.
The CSI slid 2.3% on Tuesday. The last time the gauge entered a bear market was in 2018, when investor concerns about China’s trade war with the U.S. took a toll on equities.
Omicron outbreaks in China have further soured sentiment toward equities after the CSI 300 last year capped its worst annual performance since 2018. Battered by Beijing’s clampdown on tech giants and debt troubles in the real estate sector, Hong Kong’s Hang Seng Index has already been in a bear market since August.
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