"A Bit Troubling" - Chinese Stocks Suffer Worst Start To A Year Since 2016 As 'Trump Effect' Looms

China's market turmoiled overnight after the Caixin Manufacturing PMI fell to 50.5 from 51.5 in November (significantly worse than the median forecast of 51.7 by economists).

The findings reflect uncertainties facing Chinese exports, which have powered the $18 trillion economy’s uneven recovery but may take a hit when Trump takes office later this month.

“Exports dragged on demand amid mounting uncertainties stemming from the overseas economic environment and global trade,” Wang Zhe, senior economist at Caixin Insight Group, said in a statement accompanying the release.

Chinese President Xi Jinping acknowledged new challenges from the external environment in a New Year’s Eve speech on Tuesday.

China’s 10-year government bond yields slid three basis points to 1.64%, a fresh record low. The offshore yuan gained 0.2% after the Chinese central bank set a strong fixing to support the currency.

But it was stocks that felt the brunt of the weakness, with Chinese stocks suffering the worst start to a year in nearly a decade.

“It’s a bit troubling that investors are starting the new year in a cautious mode as this is happening after clearer stimulus signals from Beijing during its December policy meetings,” said Homin Lee, senior macro strategist at Lombard Odier.“The underlying momentum for China remains quite fragile, and it will take some efforts from the authorities to change the conversation on the country’s medium-term deflationary dangers.”

The CSI 300 Index closed down 2.9% on Thursday, its steepest drop on a year’s first day of trading since 2016. The Hang Seng China Enterprises Index slid as much as 3.1%. 

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