(Bloomberg) — China’s tech equities gauge plummeted to a record low, with concerns over rising US interest rates and a weak export outlook weighing heavily on investor sentiment.
Most Read from Bloomberg
On Monday, the Star 50 Index plunged by as much as 1.9%, marking its sixth consecutive month of decline. Cambricon Technologies Corp took the biggest hit, dropping by as much as 17%. ASR Microelectronics Co. and Loongson Technology Corp. also experienced significant declines of at least 5%.
China is currently grappling with economic growth and struggling exports due to the impact of high global interest rates. This has led to waves of selling in the country’s markets. The Hang Seng Tech Index, which also tracks listed Chinese firms, has already declined by 11.3% this year.
“Liquidity conditions are the main factor dragging down the tech sector,” said Li Xuetong, a fund manager at Shenzhen Enjoy Equity Investment Fund Management Co. “With the Federal Reserve’s hesitation to lower rates, electric vehicle and pharmaceutical stocks are finding it difficult to secure funding and maintain their current valuations.”
Meanwhile, the outlook for renewable exports, which directly affects companies on the Star 50 Index like Trina Solar Co., Jinko Solar Co., and GoodWe Technologies Co., is not looking favorable. According to Clelia Imperiali, an ESG trade analyst at Bloomberg Intelligence, the European Union’s investigation into Chinese subsidies for electric vehicles could result in losses of nearly $7 billion in car and van shipments.
Although Huawei Technologies Co.’s recent releases of its M7 electric vehicles and Mate 60 Pro smartphone have generated increased demand for stocks related to the Chinese tech giant, they have failed to give the index a significant boost.
Li also noted that the Shanghai Composite Index falling below the crucial 3,000 level triggered forced selling and client redemption, which may further intensify market instability.
The Star Board was launched in Shanghai five years ago as a high-profile project personally announced by President Xi Jinping during the US-China trade war. Its objective was to support companies with domestically developed technology in order to counter US export restrictions.
Initially, the board was viewed as an experimental project to provide funding to early-stage firms and test the registration-based IPO process, which has now been expanded to the entire onshore market.
The Star 50 Index consists of the 50 largest and most liquid firms listed on the Star Board. Semiconductor Manufacturing International Corp., Beijing Kingsoft Office Software Inc., and Advanced Micro-Fabrication Equipment Inc. are the top three companies on the index.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
