China Stocks Slip Again

Hong Kong rebounds and losses are minor compared to Monday, but the downtrend continues.
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BEIJING -- With Asian markets still reeling from recent declines, China stocks weakened again Tuesday but Hong Kong shares managed a small gain.

Monday's session saw China names swimming in red as a wave of panic selling took down emerging markets plays

en masse

. Investors bailed out of commodity stocks such as

Yazhou Coal

(YZC)

and

Petrochina

(PTR) - Get Report

.

Refiners such as

China Petroleum & Chemical

(SNP) - Get Report

bucked the downward trend after wire services reported China plans to increase retail gasoline and diesel prices by about 500 yuan per ton this week

China tech was broadly down, including

Sohu

(SOHU) - Get Report

, off 7% to $25.15, and

Ctrip

(CTRP) - Get Report

, losing 6.2% to $45.59.

Tuesday the Shanghai Composite Index closed down 3.2% to 1604, while Hong Kong's Hang Seng index managed to eke out a tiny bit of green, up 0.4% to 15872.

The scale of the recent selloff in Asia markets is "kind of unprecedented in the last couple of years. We've been on a one-way up trend," said one regional tech analyst who has been fairly negative on most emerging markets stocks since last summer. "I think valuations have been too high and didn't really reflect the risk; investors were giving the names too much credit for future growth."

Even relatively blue-chip names weren't immune. Take China

Mobile

(CHL) - Get Report

, which lost 6.6% to $25.83. "China Mobile is an extremely widely-held stock by investors that are not Asia-dedicated money," said the analyst, who declined to be named.

Over the past nine months, hedge funds have been piling into China names looking to make quick profits. "They've recently poured in looking for a liquid non-cyclical proxies

for emerging markets growth. As a result many stocks were re-rated upwards, and now all the benchmark stocks are blowing up."

China investors could take some (shallow) comfort in the notion that they weren't the only ones hurting. As UBS chief Asia Pacific economist Jonathan Anderson put it in a Tuesday note, "This is not an

Asian

sell-off. Rather, this is a global retrenchment -- and stock markets in EMEA

Europe, the Middle East and Africa and LATAM

Latin America got hit a lot harder than most Asian indices."

The good news, he adds, is that there's been no serious pressure on most Asian currencies or interest rates, meaning he sees no need to make big changes in macroeconomic forecasts. The bottom line: "Nothing much to do but hunker down and wait for markets to trough," Anderson concludes.