Chinese stocks slump to 1-year low as foreign selling persists

Chinese stocks fell to a 12-month low as foreign investors continued to dump yuan-denominated shares. Foxconn Technology Group’s mainland-listed arm tumbled on reports the company’s factories were being investigated by the government.

The Shanghai Composite Index declined 1.5 per cent to 2,939.29 at the close, a level not seen since October 31. The CSI 300 Index dropped 1 per cent and the Shenzhen Composite Index retreated 1.9 per cent. A gauge tracking the biggest 50 stocks on Shanghai’s Nasdaq-like Star Market slumped 2.5 per cent to a record-low.

Hong Kong’s market is closed for a public holiday.

Foxconn Industrial Internet, a unit of Apple supplier Foxconn Technology, tumbled by the 10 per cent daily limit to 14.55 yuan in Shanghai, after China’s state media said several of the group’s mainland Chinese plants were under tax and land use investigations.

Hon Hai Precision Industry, Foxconn’s flagship listed vehicle, slid 2.9 per cent in Taipei for the steepest loss in three months.

Raw-material and industrial stocks were the biggest decliners. Ganfeng Lithium Group slumped 3.9 per cent to 43.66 yuan and Aluminum Corp of China, also known as Chalco, lost 3.7 per cent to 5.69 yuan. Sungrow Power Supply, which makes solar inverters, tumbled 4 per cent to 80.04 yuan and Hangzhou First Applied Material sank 5.3 per cent to 25.73 yuan.

“Overseas funds’ holdings are pretty much concentrated in big-cap blue chips, so their selling is a major driver for the market’s decline,” said Yu Mingming, an analyst at Cinda Securities. “For now, investors need to be vigilant of sectors with high exposures to foreign funds and should focus on defensive ones with low volatility and high dividend payouts.”

Overseas investors had dumped 37.2 billion yuan (US$5.1 billion) of Chinese stocks via the exchange link with Hong Kong this month up to Friday, taking the total to 164.2 billion yuan in almost three months, according to Bloomberg data. The exchange link, also known as the Stock Connect, was closed due to the Chung Yeung Festival in Hong Kong.

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Traders have moved on from last week’s better-than-estimated third-quarter economic data, with concerns lingering that the recovery would not be sustainable amid the unrelenting decline in home sales. Nomura Holdings warned growth would fall below 4 per cent next year.

Liquor giant Kweichow Moutai slipped 0.1 per cent to 1,643.98 yuan after reporting a 15.7 per cent increase in third-quarter profit. That compared with a 21 per cent growth rate for the previous three-month period.

Tsingtao Brewery shed 0.4 per cent to 80.79 yuan after the beer maker said that it had reported to the police and sealed the batch of malts, which an online video earlier showed that a worker had allegedly pissed at.

Jiangsu Teeyer Intelligent Equipment, a machinery product maker, jumped 141 per cent to 22.88 yuan on the first day of trading in Shanghai.

Other major Asian markets fell. Japan’s Nikkei 225 and South Korea’s Kospi both eased 0.8 per cent while Australia’s S&P/ASX 200 also fell by that much.