China and Hong Kong stocks started the week on a bearish note, as tech plays in both markets tracked the sell-off in US counterparts, with sentiment also hurt by the prospect of renewed China slowdown in the second half amid tighter credit. China’s blue-chip CSI300 index fared better than small caps, slipping just 0.1 percent to 3,573.39 points by the lunch break. The Shanghai Composite Index lost 0.5 percent, to 3,144.30 points.
In Hong Kong, both the Hang Seng index and the Hong Kong China Enterprises Index lost more than 1 percent, to 25,712.55 points and 10,480.33 points, respectively. Both China and Hong Kong-listed tech shares dropped sharply, following a sell-off on Friday in technology stocks on Wall Street that was triggered by concerns about Apple’s new iPhones and a cautious Goldman Sachs report about the sector.
China’s tech-heavy growth board ChiNext lost nearly 1 percent, while the CSI TMT Index fell 1.1 percent, both underperforming the broader market. Selling was more intensive in Hong Kong, where stocks are more vulnerable to Wall Street fluctuations. An index tracking IT shares tumbled 2.6 percent, led by Chinese tech giant Tencent Holdings Ltd.
Elsewhere, investors dumped cyclical stocks amid rising concern that China’s economy would suffer from an expected credit tightening in the second half. UBS strategist Gao Ting said that although Chinese investors “are likely mentally prepared for short-term liquidity pressure due to financial regulations, we don’t believe they pay enough attention to future economic trends.”
Gao also said he expected that general credit may tighten, hitting property and other investment activity, and that factory gate prices “may decline rapidly.” Echoing the view, Haitong Securities analyst Jiang Chao said that “credit tightening presents the biggest risk in the second half,” as impacts from Beijing’s deleveraging campaign will be transmitted to the real economy.
Also souring sentiment in China, major state-controlled newspapers on Monday urged the stock market regulator not to “balk or backtrack” on reforms, denting hopes that IPOs could be suspended if the market remains weak. Bucking the trend, China Vanke jumped 4.6 percent in Shenzhen and rose 0.7 percent in Hong Kong, after Shenzhen Metro became its top shareholder, replacing rival developer China Evergrande Group.