SHANGHAI: China stocks ended sharply lower on the first trading session of 2025, logging their weakest New Year start since 2016, as factory data disappointed investors who are also waiting for more policy support. Hong Kong shares also fell.
China's blue-chip CSI 300 Index closed down 2.9%, while the Shanghai Composite Index plunged 2.7%. Hong Kong benchmark Hang Seng was down 2.2%.
China's factory activity grew in December at a slower-than-expected pace, as overall sales were dampened by falling export orders amid concerns over the trade outlook, a private-sector survey showed.
Chinese stocks registered their first annual gain in 2024 following an unprecedented three-year decline, as a package of stimulus policies lifted investor sentiment.
"I think from the beginning of the year to March is more uncertain because the next big policy event is in March," said Minyue Liu, investment specialist for Greater China equities at BNP Paribas Asset Management.
Many participants expect the market will lack clear direction until the National People's Congress in March, where the government's growth target and stimulus measures will be announced.
"Without solid macro data, macro delivery and big policy announcement in the first two months, the market is likely to be more volatile," Liu said.
Analysts say China needs to do more to support consumers as the world's second-largest economy tackles a property market downturn and weak confidence.
Donald Trump's talk of tariffs in excess of 60% on imports of Chinese goods has coincided with central government pledges of proactive policies to promote growth this year, muddying the outlook for an economy that has struggled for momentum.
"Uncertainties surrounding potential tariff increases by the Trump administration could affect exports. Boosting domestic demand remains crucial for fundamental recovery," analysts at Huaxi Securities said in a note.
The yuan weakened to its lowest level against the U.S. dollar in almost 14 months, while China's bonds rallied as investors sought safe-haven assets.
China's central bank kicked off a second round of operations this week under a newly-created funding scheme aimed at supporting the country's stock market. The country also announced reduced fees for the programme on Thursday.
Financial and tech shares led the declines, falling 3.5% and 4.3%, respectively.
Real estate stocks were down 2.4%, despite prices of new homes in China rising at a slightly faster pace in December.
Shares of hypermarket chain Sun Art shares were down 20%, after Alibaba said on Wednesday it had agreed to sell its majority stake in the company to Chinese private equity firm DCP Capital. Alibaba stocks lost 1.3%.
Tech giants traded in Hong Kong were down 2.5%. - Reuters
