Caution in markets as Chinese crackdown causes biggest knock since 2008

·3 min read
Stock market business graph chart on digital screen. Success and loss money concept. Trading screen board.
US-listed stocks in China took a hammering following news of a crackdown in certain sectors. Photo: Getty

Listed Chinese companies were in focus in the stock market on Tuesday, as investors closely watched the fallout of a wide-reaching crackdown by Beijing in the tech and education sectors. 

Shares of US-listed Chinese companies headed lower overnight — suffering their biggest two-day fall since the financial crisis in 2008. 

An index following the 98 biggest US-listed Chinese socks, the Nasdaq Golden Dragon China Index, has been knocked almost 15% off course in that time. 

It had hit record highs in February, but has lost nearly half of its value, dipping 45% since then. 

A series of crackdowns by Beijing in tech and education roiled stocks, with the latest dip coming following a $120bn (£87bn) overhaul of private tutoring in the region. All institutions offering tuition on school curricula will now be registered as non-profits. 

The dive has seen about $770bn eliminated from the value of US-listed Chinese stocks in the last five months. 

Following the US lower, stocks in China and Hong Kong suffered a second day of losses overnight, with the Hang Seng (^HSI) finishing 3.1% lower and the SSE Composite (000001.SS) declining 1.9%. 

The Nikkei (^N225) headed 0.5% higher, bucking the trend in Asia. 

In Europe, the FTSE 100 (^FTSE) was 0.3% lower at the close in London. The CAC (^FCHI) also fell 0.6% and the DAX (^GDAXI) fell 0.5%. 

Moonpig (MOON.L) shares were knocked by about 5.9% in early trade following its results, later sinking to trade around 9.8% lower by the close. The online card company saw its revenue and profit more than double in its first set of results since its IPO. It reported revenue of £368.2m, up 113%, and adjusted core earnings of £92.1m, up 107%, in the 12 months to the end of April.

It said on Tuesday it expected headline revenue to decrease this year as lockdown restrictions eased, but said the year had started moderately ahead of expectations.

Read more: Pingdemic: What to do if your employer asks you to turn off the NHS Test and Trace app

By the closing bell in London, US stocks had sunk deeper into the red. The S&P 500 (^GSPC) fell 0.9%, the Dow (^DJI) declined 0.6% and the tech-heavy Nasdaq (^IXIC) was down 2%. 

Alongside concerns about Chinese stocks listed in the US, investors are braced for a busy earnings season stateside, with Apple (AAPL), Microsoft (MSFT), Starbucks (SBUX) and Google's Alphabet (GOOG) on the slate for later on today.

"There is no doubt that the uncertainty surrounding the Fed's next move, as well as disruptions caused by rising coronavirus cases and events in Asia, are forcing investors to cash out their profits before going on vacation this summer," said Naeem Aslam, chief market analyst at AvaTrade.

"However, investors should not be overly concerned because the Fed is expected to maintain its dovish stance in the coming months, and stock traders should closely monitor the performance of technology stocks this week in light of Tesla's strong earnings yesterday."

Watch: China stocks tumble amid regulatory crackdown

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting