China Markets Sink As Stimulus Trade Goes Awry

Losses in Chinese assets are mounting again as Beijing’s modest stimulus disheartens investors, John Cheng reported for Bloomberg News.

Photo Insert: The Hang Seng China Enterprises Index of Hong Kong-listed Chinese firms slumped more than 6% last week, the steepest drop since March.

The Hang Seng China Enterprises Index of Hong Kong-listed Chinese firms slumped more than 6% last week, the steepest drop since March. The CSI 300 Index of shares fell 2.5% through Wednesday before markets closed for the holidays.

The yuan sank to its weakest since November. The Passenger Car Association (PCA) said vehicle sales for June will drop 5.9% year-on-year. Beijing is axing massive stimulus that drove leveraged buying and inflated asset prices—a distortion China is determined not to repeat.

The Nasdaq Golden Dragon China Index of US-listed Chinese stocks tumbled 2.7% on Friday, ending the week with a loss of 8.6% — its biggest since March.

Morgan Stanley’s quantitative team said active long-only managers have remained net sellers of China’s growth and tech stocks in May and June. Hedge funds have been adding bearish bets as short positions by the cohort jumped 32% in June.

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