Plunge in China’s Markets Intensifies

The Hang Seng China Enterprises Index of big mainland companies listed in Hong Kong is among the worst-performing stock benchmarks globally this week. The offshore yuan extended declines, hitting the weakest level in a year. High-yield dollar bonds are headed for the longest stretch of weekly losses since March.

Sentiment toward Chinese assets has soured as Covid lockdowns slow economic growth and policy stimulus falls short of investors’ expectations. Domestic equities have lost about $2.7 trillion of market value this year, prompting the authorities to step up efforts to halt the decline.

“For a turnaround in sentiment, we need to see something sincere from policy makers, either a lot of extra liquidity, a major shift in the Shanghai situation, or a massive surprise that will breathe some new hope into the market,” said Wang Yugang, a fund manager at Beijing Axe Asset Management Co.

The Hang Seng China Enterprises Index shed 5.6% this week, the biggest drop in more than a month. Other assets are also under pressure, with the onshore yuan on track for its biggest weekly loss since August 2019. Options traders are pricing in a further weakness for the currency after it breached a key technical support level on Wednesday for the first time since September.

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