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Chinese stocks tumble to multi-year lows after Wall Street rout

By Noah Sin
An investor sits in front of displays showing stock information at a brokerage office in Beijing, China October 11, 2018. REUTERS/Thomas Peter

By Noah Sin

HONG KONG (Reuters) - China's benchmark Shanghai Composite Index dived to near four-year lows on Thursday, joining a global equities rout after a tech sell-off battered Wall Street overnight.

Investors sold across the board amid a confluence of factors, including rising interest rates in the United States, a heated Sino-U.S. trade battle as well as IMF warnings about global financial stability and growth risks.

The Shanghai Composite slumped more than 6 percent before recouping some ground to end the day down 5.22 percent at 2,583.46 points, levels not touched since Nov. 25, 2014. It was the index's worst day since Feb. 25, 2016.

The blue-chip CSI300 index, meanwhile, tumbled 4.8 percent to 3,124.11 points, its lowest level since July 2016.

Steven Leung, sales director at brokerage UOB Kay Hian, said the impact of the U.S. equity sell-off and trade war concerns were weighing on stocks and would endure across Asia.

"We haven't really seen such a big downturn in U.S. stocks for quite some time. Markets are not sure how long this will continue for," he said.

"The market is also worried that U.S.-China relations will get even worse."

In Hong Kong, the Hang Seng Index was off about 3.9 percent at 0710 GMT.

Tech stocks, which were caught in the trade war crossfire last week, suffered again on Thursday. Companies including HNA Technology, TDG Holding, and Yihua Lifestyle Technology, down by the daily maximum of 10 percent.

The smaller Shenzhen index was down 6.45 percent and the start-up board ChiNext Composite index was weaker by 6.3 percent.

"Unless you withdraw from stocks entirely, you'd want to go for more defensive stocks, like public utilities," Leung said.

Shares in infrastructure firms from China's west bucked the down trend. The shares rallied after Chinese President Xi Jinping called for the launch of the planning and construction of the Sichuan-Tibet railway. Stock of Tibet Tianlu, principally engaged in construction and mineral exploration, jumped near 7 percent.

One Shanghai-based trader expects the market will find some support given it has been losing altitude over several months, while U.S. stocks are falling from a high point.

"Fund managers will find certain stocks very cheap," he said.

However, there are risk factors for mainland stocks as a China-U.S. trade war continues to hurt the revenues of exporters, which will in turn weigh on the major indices, he added.

The index measuring price differences between dual-listed companies in Shanghai and Hong Kong stood at 123.

A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong, and vice versa.

There was net selling of mainland shares to the tune of about 3.5 billion yuan through the connect scheme linking Hong Kong and Chinese markets.

Elsewhere in Greater China, the Taiwan SE Weighted Index losing over 6 percent and falling below 10,000 points.

There is room for further losses, said Bor Yi Chien, Vice President at the Consulting Department of Cathay Futures.

"We can't see where the bottom point will be; we are looking at it conservatively first. We will first see if the 10,000 threshold will be able to be propped up. With a fall like today, not many people will be brave enough to come close to the market."

(Reporting by Noah Sin; Additional reporting by Jeanny Kao; editing by John Ruwitch and Eric Meijer)