China and Hong Kong stocks slumped on Monday morning, with investors joining a global flight from risky assets on lingering economic concerns and rising risks from the UK’s possible exit from the European Union.
Sentiment was dampened by worries over China’s economic health after data showed slowing growth in fixed asset investments and retail sales, offsetting optimism that MSCI may add Chinese shares to its emerging market index this week.
China’s blue-chip CSI300 index fell 0.8 percent, to 3,138.06 points by the lunch break, while the Shanghai Composite Index also lost 0.8 percent, to 2,904.23 points.
Selling was more intensive in Hong Kong, where financial markets are more open and thus more vulnerable to global market volatility. The benchmark Hang Seng index dropped 2.5 percent.
In June 2015, China’s “Great China Bubble” burst, triggered by the destruction of margin trades, and sending shockwaves across global financial markets.
“One year after the crash, China’s stocks, bonds, property and currency are still expensive,” wrote Hong Hao, chief strategist of BOCOM International.
He added that the Shanghai index was still roughly 17 percent above the theoretical support level of 2,500 even after almost halving from last summer’s peak.
“Although Hong Kong is trying to heal, struggling global markets will be a drag.”
Global market volatility surged lately as investors fretted ahead of this week’s central bank meetings as well as Britain’s June 23 referendum on whether to remain in the European Union.
Sentiment was not helped by lacklustre Chinese data.
Foreign direct investment (FDI) in May fell 1 percent from a year earlier, marking the first year-on-year decline since December, according to data published on Sunday.
Data on Monday showed that China’s fixed-asset investment growth eased to 9.6 percent in January-May from the same period a year earlier, below market expectations. Industrial output and retail sales data were not encouraging either.
“Given today’s data, there is higher risk for China to miss the growth target of 6.5 percent y/y in Q2,” ANZ wrote in a research note.
Shares fell across the board in China and Hong Kong.