Chinese stocks erased $6.3 trillion since 2021 peak

Grim milestones have kept piling up in recent days: Tokyo has overtaken Shanghai as Asia’s biggest equity market, while India’s valuation premium over China has hit a record. Locally, a meltdown in Chinese shares is wreaking havoc on the nation’s asset management industry, pushing mutual fund closures to a five-year high.

The Hang Seng China Enterprises Index has already lost 11% in 2024. Coming after a record four-year losing streak, the slump is reinforcing a structural shift that’s seeing everyone from active money managers to passive funds turn their back on the world’s second-largest stock market.

The Nasdaq Golden Dragon China Index slipped as much as 2.2% at the start of US trading Friday, extending losses to a fifth consecutive day.

In all, some $6.3 trillion has been wiped out from the market value of Chinese and Hong Kong stocks since a peak reached in 2021, underscoring the challenge that Beijing faces as it seeks to arrest a decline in investor confidence. Authorities have ruled out the use of massive stimulus to revive the flagging economy, leaving traders wondering when things will improve.

“What we are seeing this year so far really is a continuation of what we saw last year,” John Lin, AllianceBernstein’s chief investment officer of China equities, said in an Jan. 17 interview on Bloomberg Television. “These squeezing-the-toothpaste type of stimulus policies so far haven’t been able to turn around the underlying bottom-up fundamentals of areas like the property sector.”

‘Waiting Game’

The HSCEI gauge plunged more than 6% this week and is on track to record its worst January performance in eight years. On the mainland, the CSI 300 Index has dropped in nine of the last 10 weeks. Signs that state…