China's small-cap rock stocks continue to fall as market surveillance tightens

(Bloomberg) - China's small-panel stocks continued to sink Tuesday as a cabinet pledge to tighten market oversight sparked fears of delisting companies in poor financial health.

Most read from Bloomberg

• Beyond the Ivy League: Surprise Winners on the List of Colleges with the Highest Returns on Investment

• Trump Media's $5.3B Selloff Deepens as 270% Rally Fades

• S&P 500 Falls Below 5100 as Big Tech Stocks Sell Off: Market Roundup

• Iranian Attack on Israel Sparks Race to Avoid All-Over War

• Apple faces worst iPhone drop since Covidien's incident amid rising rivals

The CSI 2000 fell 7.2%, bringing its weekly loss to 11%. The CSI 300, which tracks mostly blue-chip companies, outperformed. After rebounding more than 2% on Monday, the index slipped 1.1%.

Traders reacted to a statement from the State Department late Friday vowing to toughen stock-listing standards and urging companies to improve corporate governance and boost dividend payments. Analysts said the guidelines encouraged investors to switch to bigger companies amid uncertainty about the economic outlook and earnings growth.

"With the new capital market reforms focusing on profitability, dividend payouts and shareholder returns, we expect Big Rock to continue to outperform Small Rock," said Marvin Chen, an analyst at Bloomberg Intelligence. " Under the new guidelines, unprofitable and illiquid small cap companies may face greater pressure to delist.

Market observers likened Friday's statement to measures issued in 2004 and 2014 to develop the capital markets, where a round of market reforms were ushered in.

The latest guidance comes as investors are reassessing the outlook for China's stock market after it rebounded from its February lows. Sentiment weakened after data on Tuesday showed that retail sales and industrial production lost momentum in March, despite stronger-than-expected economic growth in the first quarter.

Read: China's economic growth surprisingly driven by industry (1)

The CSI 2000 Index has fallen about 23% this year, while the CSI 300 Index has risen more than 2%.

Most Read by Bloomberg Businessweek

• Global economic recovery masks growth in debt and inequality

• Key Takeaways from BusinessWeek's Investigation into Teen Pornography Extortion

• How Blackjack Masters Beat the Challenge of Aging

• Battle for AI Supremacy in the Middle East Measured by Data Centers

• Surging Cocoa Production Attracts Africans Back to Cocoa Beans

©2024 Bloomberg News