Chinese Stocks Slump as Economic Concerns Spoil Investor Mood

(Bloomberg) — Chinese stocks dropped after traders returned from a long weekend as a slew of negative developments weighed on sentiment.

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The CSI 300 Index of mainland shares slipped as much as 1.4% after markets reopened from the Dragon Boat Festival holiday. A gauge of Hong Kong-listed Chinese shares was among the biggest decliners in Asia, falling as much as 2%.

The retreat came as weak travel spending and renewed concern over the property sector reinforced worries over the sustainability of China’s economic recovery. Geopolitical risks weighed on shares of electric vehicle makers as traders awaited the European Commission’s decision of provisional duties expected this week.

“The recent weekend holiday didn’t see as strong consumption as the previous May golden week, and weekly property sales are weak though that’s also volatile,” said Xin-Yao Ng, director of investment at abrdn. “These follow on from weak macro readings earlier like the NBS PMI and imports,” he said.

While domestic tourism spending rose 8.1% year-on-year during the extended weekend, the trend showed weakening momentum compared to other recent short holidays, according to Citigroup Inc. Average spending per traveler remained muted, analysts Brian Gong and Alicia Yap wrote in a note, weighing on travel-related stocks including Changbai Mountain Tourism Co.

Authorities’ recent emphasis to stabilize the property market failed to lift sentiment as Dexin China Holdings Co. became the latest builder to be wound up. Developer stocks entered a technical bear market last week amid skepticism over a broad support package unveiled by the central government.

China’s nascent stock rally is losing momentum, with a gauge of companies listed on the Shanghai stock exchange coming close to falling below a key psychological level for the first time since late-March on a closing basis.

Traders are expecting more forceful measures to support the market after recent efforts fell short of expectations. They will also be focused on the upcoming third plenum, a closed-door conclave in July, for signals of potential policy pivots and future moves to steady the slowing economy.

(Updates with more details from the fifth paragraph onwards.)

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