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China's Biggest Stocks Suffer Worst Quarterly Loss in Two Years

  • Stunning reversal as small caps rally on tech optimism
  • Bonds snap five-quarter losing streak, while yuan surges
Stock information is displayed on an electronic board at a securities brokerage in Shanghai, China.
Photographer: Qilai Shen/Bloomberg
Updated on

China’s markets have been turned upside down this year as the prevailing narrative shifted from deleveraging to trade wars, creating headaches for investors positioning ahead of MSCI Inc. inclusion in June.

Large cap stocks, which led gains in 2017, are among the biggest decliners, while beaten down small caps are staging their best rally in more than two years. Government bonds snapped a five-quarter losing streak as fears of tighter liquidity failed to materialize. Even the currency surprised, blasting past the most bullish analyst forecast.