Chinese stocks open 2019 with losses on weaker factory activity

Triggered by a worse-than-expected reading for the country’s factory activity in December, Chinese shares slipped on the first trading day of 2019, with the benchmark Shanghai Composite Index dipping by 1.15 percent.

The Shanghai composite, the country's major share average, declined 1.15 percent or 28.61 points to close the day at 2,465.29, following disappointing results of China’s manufacturing for the month of December.

On Monday, the National Bureau of Statistics released the official Manufacturing Purchasing Managers' index (PMI), which dropped below the critical 50 level to stand at 49.4. This marked the first contraction since July 2016 and the weakest reading since February 2016.

A reading above 50 reveals expansion, while a reading below that level indicates contraction.

On Wednesday, a private survey by Caixin/Markit showed that the reading dipped to 49.7 in December from 50.2 in November, lower than a Reuters poll which predicted a reading of 50.1 for the last month of 2018.

The smaller Shenzhen Component Index dropped by 1.25 percent to end at around 7,149.27 points, while the Nasdaq-style ChiNext enterprise board shed 1.74 percent to finish at 1,228.77 percent.

Medical and pharmaceutical names led the losses, with Huadong Medicine Co Ltd seeing its shares plunge by the daily maximum limit of 10 percent to close at 23.81 yuan (US$3.74) per share.

The A-share market underwent a very stressful year in 2018 and posted the worst performance of the past decade, as major indexes in Shanghai and Shenzhen both saw annual losses of more than 24 percent during the past twelve months.

Analysts attributed the turbulence to two main factors: the ongoing trade war between Beijing and Washington and the slowdown in China's own economy following decades of strong growth.