Sinking profits turn China’s $3.5 trillion stock rout into trap

Pessimism has gripped Chinese stocks, with no end in sight for a deepening selloff as investors confront the realities of an economy that’s weak enough to erode corporate profits but not to trigger forceful new stimulus. The world’s second-largest equities market has lost $3.5 trillion in value from a peak in May, data compiled by Bloomberg show. The rout intensified last week, pushing the onshore benchmark CSI 300 Index into a bear market and a technology sector gauge in Hong Kong toward erasing all its gains since Beijing’s sweeping growth support package two years ago. At the heart of investor…