China Stocks Test Critical Support Levels as Selloff Extends

(Bloomberg) — Chinese stock benchmarks are approaching key technical levels amid a relentless selloff, and a tumble below the thresholds may point to further losses ahead.

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The downtrend comes as global investors remain pessimistic on China’s outlook, with its economy showing a fragile recovery and the real estate crisis continuing to worsen. Foreign outflows have persisted despite Beijing’s attempts to stabilize sentiment. Moody’s Investors Service’s wide-ranging outlook downgrade across China’s sovereign and corporate ratings has added to the headwinds.

Hong Kong’s Hang Seng Index is approaching a long-term trendline that goes back to the 1998 Asian financial crisis. The line has offered support during the 2008 global financial crisis, and the benchmark was able to quickly rebound after breaching the threshold in October last year.

Yet traders worry the index may extend losses should it tumble below the support this time around given poor sentiment. Down more than 17% this year, the HSI is the worst-performing major stock index in the world.

The gauge fell as much as 0.6% on Friday, heading for its lowest close in a year.

The so-called “fate line” for the Shanghai Composite Index, which has held up in times of crises in the past 18 years, has also been repeatedly tested this year. Meanwhile, the CSI 300 Index is near its historic trendline after tumbling to its lowest since 2019 this week. The benchmark for onshore shares fluctuated between gains and losses Friday.

–With assistance from Akshay Chinchalkar.

(Updates with Friday’s moves.)

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