(Bloomberg) -- A selloff in mainland China and Hong Kong stocks deepened as investors remained concerned about the health of world’s second-largest economy heading into next year.
The MSCI China Index slid as much as 2.3%, on track for a third straight day of declines. The gauge was headed for its lowest close since November 2022. On the mainland, the benchmark CSI 300 Index finished 1.9% lower as foreigners sold the largest amount of shares since mid-October.
Moody’s Investors Service cut its outlook for Chinese sovereign bonds to negative on Tuesday afternoon, the latest blow to investor sentiment. Equity losses have continued in December following last month’s lackluster performance, as traders saw policy support falling far short of what’s needed to rescue the economy out of the doldrums.
Moody’s move is “a confirmation of risks that markets have already been pricing in,” said Marvin Chen, strategist at Bloomberg Intelligence. It “will not help market sentiment,” he added.
Sentiment remains so fragile that traders on Tuesday looked past data that showed a private gauge of China’s services activity continued to expand in November. Official figures last week showed both manufacturing and services activities shrank during the month.
“The accumulation of news over last few weeks would be raising questions on China’s economy into 2024,” said Xin-Yao Ng, an investment director for Asian equities at abrdn. “Macro data has been soft. The big concern over the property slump remains as sales volume are still very weak.”
Overseas investors sold 7.5 billion yuan ($1 billion) of mainland shares on a net basis via trading links with Hong Kong on Tuesday, the most since Oct. 19, according to data compiled by Bloomberg.
The Hang Seng China Enterprises Index slumped 1.6%, dragged down by a sharp selloff in some stocks such as Lenovo Group Ltd. and NetEase Inc. A Bloomberg Intelligence gauge of property developers was down 2.6%.
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