The crisis followed a report that Russia had asked China for military assistance for its war in Ukraine. Even though China denied the report, traders feared that Beijing’s potential overture to Vladimir Putin could provoke a global backlash against Chinese companies, and even sanctions. The United States and China were to hold their first high-level in-person talks since Monday’s invasion.

Other negative headlines included Tencent Holdings Ltd. who would risk a record fine for violating anti-money laundering rules, as well as a lockdown in Shenzhen for at least a week after virus cases doubled nationwide.

“There’s a horrible, awful feeling around China,” said Adam Crisafulli of Vital Knowledge. “Delisting fears and renewed COVID pressures have dealt a double whammy to the few remaining bulls. There is a wholesale sell-off and even optimists think space is just too tough right now. Valuations may be cheap and the PBOC is one of the few central banks to ease policy, but that’s not enough.

Adding to the sentiment, analysts at JPMorgan Chase & Co. downgraded Chinese internet stocks to equivalent ratings for sell, including JD.com, Alibaba and Tencent, calling them “uninvestable” in the near term. “Due to rising geopolitical and macroeconomic risks, we believe that a large number of global investors are reducing their exposure to the Chinese internet sector, leading to significant outflows of funds,” the company wrote in a statement. March 14 report.

In Asian trading on Monday, the Hang Seng China Enterprises index posted its biggest drop since November 2008, while the Hang Sang Tech index fell 11% in its worst decline since the gauge launched in July 2020. That wiped out $2.1 trillion in value from a peak the previous year.

“While it’s tempting to call for a bottom after such a massive sell-off, we believe the valuation is not low enough to say that everything bad has been priced,” said Leonardo Pellandini, strategist at Bank Julius Baer.

Last week, the risk of delisting Chinese companies from the United States, along with additional regulatory concerns and the exclusion of a company from a Norwegian sovereign wealth fund, triggered a rout in the Golden Dragon Index, which tracks US certificates of deposit from Chinese companies. . The gauge fell 18% last week to close at the lowest level since September 2015.

The largest Chinese technology exchange-traded fund in the United States has erased all gains since its debut in 2013. The KraneShares CSI China Internet Fund (KWEB), a $4.9 billion ETF that invests in companies Chinese technologies, has fallen by more than 40% this year. , wiping out all gains, including dividend payouts, since it began trading nine years ago.

“The current problem is the lack of a positive catalyst in China, with regulatory noise continuing to create an overhang on ADRs,” said Sharif Farha, portfolio manager at Safehouse Capital. “In the near term, we believe that Chinese equities as a whole will continue to come under selling pressure. In the longer term, the fittest will survive and likely grow stronger, bigger.