The rally in Chinese stocks has ended abruptly as the government in Beijing failed to provide additional economic stimulus measures.
Hong Kong’s Hang Seng stock index fell more than 10% before recovering slightly to close down 9.5% on the day.
The markets lost steam after China’s National Development and Reform Commission failed to offer any new economic stimulus measures to bolster the country’s ailing economy.
The drop in the Hang Seng was the steepest one-day decline since January of this year when it fell 6.3%.
A week ago, Hong Kong’s main stock exchange was at a 20-month high after gaining 31% over 13 trading sessions.
Similarly, mainland China’s CSI 300 index rose 27% over the same 13 trading sessions leading into October.
Chinese equities shot upwards after Beijing announced economic stimulus measures that included mortgage rate cuts to support the housing sector, the reduction of bank capital requirements to boost lending, and money to help companies’ buyback their own stock.
The Hang Seng exchange in Hong Kong responded to that stimulus by posting its best performance since 1973 when it rose more than 70% in a 13-day stretch.
Investors and analysts expected officials in Beijing to announce additional economic stimulus to boost an economy that is suffering from weak consumer spending and a debt crisis in the property sector.
Failure to provide additional stimulus has sent Chinese equities sharply lower.
