Bear Market Looms for Chinese Equities as Investors Lose Faith

(Bloomberg) -- A gauge of Chinese shares traded in Hong Kong inched closer to a bear market as a wobbling economic recovery, intensifying geopolitical tensions and a weaker yuan kept investors away.

The Hang Seng China Enterprises Index slumped 1.3% on Monday, taking its losses from a Jan. 27 peak to a whisker away from reaching 20%. Meituan was the biggest drag amid concerns that increased competition will dent the e-commerce firm’s profitability.

The grim milestone looms as China’s post-Covid recovery loses momentum and earnings fall short of high expectations. Investors say the market lacks catalysts for a rebound as growth expectations are being pared back, while frictions with the US persist on issues from technology to Taiwan. The HSCEI gauge has erased about half of the gains seen during a three-month reopening rally through January.

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“China’s domestic recovery just hasn’t been as strong as expected, and not enough to offset worries of a global slowdown,” said Marvin Chen, an analyst with Bloomberg Intelligence. “Markets may be getting fatigued waiting on catalysts such as monetary easing or thawing in US tensions, and are looking elsewhere for growth.”