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Investors in mainland stocks are running out of places to hide.
A sell-off in internet shares has dragged Tencent and Sina down more than 15 per cent since March and small-cap stocks have been the latest to buckle, with the ChiNext Index entering a bear market last week.
The few pockets of strength in the US$3.2 trillion stock market are disappearing as the mainland's weakening economy reduces investor appetite for even the fastest-growing companies. All 10 industry groups in the CSI 300 Index of mainland- traded shares have retreated this year.
"If I were a non-emerging market investor and I had a choice, I wouldn't be investing in China at all at the moment," said John-Paul Smith, the London-based emerging-market strategist at Deutsche Bank.
He warned in March that risks in the mainland market were increasing as investors piled into a diminishing number of rising stocks.
The CSI 300 index has dropped 9.2 per cent so far this year, while the H-share index declined 8.3 per cent. The ChiNext index of shares in Shenzhen has retreated 5.8 per cent.
"With small-caps retreating and big-caps in the doldrums, there's no sector in China's stock market investors can find now to put their money in," said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management.
Many ChiNext companies "don't have solid fundamentals or growth prospects and the rally was pretty much based on speculation", Wang said.
President Xi Jinping said this month that the mainland needs to adapt to a "new normal" in the pace of economic growth. Industrial output and investment growth unexpectedly decelerated last month, while new building construction fell 22 per cent in the first four months of the year. New-home prices rose in April in the fewest cities in 18 months.
Mainland money managers had reduced their positions in small-cap stocks to 32.9 per cent of holdings by last Thurs- day, from 36.6 per cent on March 24, Bocom International China equity strategist Hao Hong said.
Aaron Boesky, chief executive of Marco Polo Pure Asset Management in Hong Kong, said investors were also bearish on small-caps.


Small-caps latest mainland stocks to take a beating

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Investors in mainland stocks are running out of places to hide.

Investors in mainland stocks are running out of places to hide.