Panic Selling Grips Chinese Stocks in Biggest Plunge Since 2008

(Bloomberg) — Chinese stocks listed in Hong Kong had their worst day since the global financial crisis, as concerns over Beijing’s close relationship with Russia and renewed regulatory risks sparked panic selling.

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The Hang Seng China Enterprises Index closed down 7.2% on Monday, the biggest drop since November 2008. The Hang Sang Tech Index tumbled 11% in its worst decline since the gauge was launched in July 2020, wiping out $2.1 trillion in value since a year-earlier peak.

The broad rout follows a report citing U.S. officials that Russia has asked China for military assistance for its war in Ukraine. Even as China denied the report, traders worry that Beijing’s potential overture toward Vladimir Putin could bring a global backlash against Chinese firms, even sanctions. Sentiment was also hurt by a Covid-induced lockdown in the southern city of Shenzhen, a key tech hub, and the northern province of Jilin.

That comes on top of a spate of regulatory worries. Tencent Holdings Ltd. is reportedly facing a possible record fine for violations of anti money-laundering rules, which pushed the stock down nearly 10% on Monday. There’s also a risk of Chinese firms delisting from the U.S., as the Securities and Exchange Commission identified some names as part of a crackdown on foreign firms that refuse to open their books to U.S. regulators.

“If the U.S. decides to impose sanctions on China in total or on individual Chinese companies doing business with…