China stocks close down nearly 1% as Western sanctions weigh on market confidence

Chinese stocks closed lower on Tuesday as Western sanctions against China weakened risk appetite and lingering doubts about policy tightening here continued to weigh on the market.

The CSI 300 index closed down 0.95 percent at 5,009.25 points. The Shanghai Composite Index closed down 0.93% at 3,411.51 points.

The U.S., European Union, Britain and Canada imposed sanctions on Chinese officials on Monday, citing the Xinjiang issue; Beijing then hit back with punitive measures against the EU.

“The sanctions have dampened the willingness to take risks, especially from foreign investors, who sell stocks through the interconnected mechanism,” said Jin Jing, an analyst at Cai Tong Securities.

“Fears that domestic policies will be tightened also continued to weigh on big-rising sectors and overvalued stocks as investors became increasingly cautious,” he said.

China’s central bank governor Yi Gang said Saturday that China has more room for monetary policy regulation and should cherish and make good use of the normal monetary policy space to maintain the continuity, stability and sustainability of the policy.

Foreign investors sold a net RMB 5.1 billion of A-shares through the stock market interchange mechanism on Tuesday, according to Lufte data.

The CSI 300 Raw Materials Index and CSI New Energy Index plunged 3.6 percent and 2.9 percent, respectively.

Analysts also said pressure on public funds to sell shares in response to increasing redemptions has increased as the stock market correction continues.