Bargain hunters are nowhere to be seen as Chinese stocks trade near 2016 lows

Even dip buyers do not want to wager on Chinese stocks right now.

The benchmark Shanghai Composite Index dropped by 0.3 per cent to 2,656.11 at the close on Wednesday, just above a low of 2,655.66 set in January 2016 on the back of a rout that erased US$5 trillion in market capitalisation. A breach of that level will take the gauge to a four-year low.

The measure has dropped by 20 per cent so far in 2018, making it the worst-performing major stock gauge in the world. Souring sentiment has also spilled over to Hong Kong, with the Hang Seng Index technically entering a bear market on Tuesday after falling 20 per cent from a record high in January.

It will take some time for stocks to bottom out, according to Xun Yugen, a strategist at Haitong Securities. Xun and his team were ranked first for strategy research on Chinese equities by New Fortune magazine last year.

Investors will need to wait for inflection points in earnings growth and financial deleveraging, although equity valuations have already been battered, he said.

While listed companies have spent a record 24 billion yuan (US$3.49 billion) buying back shares so far this year, and the Chinese Academy of Social Sciences, a top think tank that advises policymakers, has pointed out emerging investment values, the country’s 140 million investors are not taking any notice.