China Stock Benchmark Tumbles as Traders Offload Favorites

(Bloomberg) -- Mainland traders rushed to offload institutional favorites on Thursday, sending China’s stock benchmark tumbling toward this year’s low.

The CSI 300 Index fell 2.7% shortly after the market resumed trading after the mid-day break, weighed down by consumer staples and raw material sector shares, such as metals firms. Meanwhile, the ChiNext gauge of small caps fell by as much as 4.8%. Foreign investors pulled a net $1 billion out of mainland stocks as of 1:17 p.m. local time via trading links with Shanghai and Shenzhen, according to data compiled by Bloomberg.

Kweichow Moutai Co. slumped as much as 6%. The firm had recently been one of the most popular trades in China, with shares up more than 30% year-to-date through its Feb. 10 record. Longi Green Energy Technology Co., another popular trade, also fell by as much as 8.4%. Tongwei Co. dropped by its 10% daily limit after rallying 41% this year through Feb. 10.

“The trend is a continued shying away from overvalued stocks favored by institutional investors,” said Mou Yiling, analyst at Kaiyuan Securities Co. “We expect the pullback in heated sectors such as baijiu to last as long as a year.”

Thursday’s rout comes as U.S. stock futures fell after an overnight surge in sovereign bond yields that dragged down shares on Wall Street. China led losses amid the worst drop in MSCI Inc.’s Asia-Pacific gauge this week.

It also comes after a warning from China’s top banking regulator on Tuesday that he’s “very worried” about risks emerging from bubbles in global financial markets and the nation’s property sector.

In Hong Kong, the Hang Seng Index fell 2.1%, led by the commerce and industry sector including Tencent Holdings Ltd. and Meituan.

©2021 Bloomberg L.P.