Stock bears grip China markets as slump in liquor, tech stocks show Tesla, bond traders are not alone in their pain

Benchmark index members in Shanghai, Shenzhen and Hong Kong have lost US$1.2 trillion of market value in sell-off from this year’s highest points

Hang Seng Tech Index has dropped 21 per cent, putting tech bellwethers in a bear market, while its Shenzhen peer, the ChiNext, tumbled 17 per cent

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Pedestrians wearing protective masks ride on an escalator in Pudong's Lujiazui Financial District in Shanghai. Pockets of markets in mainland China and Hong Kong are in a technical bear market. Photo: Bloomberg

Published: 7:00am, 8 Mar 2021Updated: 3:56pm, 8 Mar 2021

Stock traders in mainland China and Hong Kong are facing a bear squeeze as the markets’ favourite picks among liquor distillers and tech leaders tumbled from their recent highs. A handful more of so-called “stampede bets” are at risk of falling into the same boat.

About US$1.2 trillion of market value of stocks in mainland and Hong Kong blue-chip indexes has been erased from their highest points this year. Kweichow Moutai and its peers in baijiu production, as well as the Hang Seng Tech Index, have technically slipped into a bear market, after retreating more than 20 per cent over the past four weeks.

Local investors are not alone. A surge in US government bond yields and warnings about asset bubbles burnt traders who pushed the likes of carmaker Tesla Inc and bitcoin to record levels only to lose by 33 and 16 per cent respectively soon after. Some analysts caution that the slump is far from over.

“There’s still downside room after the recent sell-off on these pricey, concentrated bets, and there’s no risk appetite for the likes of baijiu stocks,” said Zhang Zhigang, an analyst at Guorong Securities. “Banking and insurance stocks offer safer margins and they stand out in terms of allocation values now.”

While signs of overstretched valuation have been plenty, it took a warning shot about risks in offshore markets from China’s top financial regulator Guo Shuqing to deflate some bubbles. China’s “two sessions” also tempered expectations by setting a “super-low” growth target and signalled a gradual normalisation of policy stimulus.