A key gauge of Chinese stocks was again poised to enter a bear market after flirting with the milestone Tuesday, as a weak economic recovery and tensions with the US continued to exert pressure.

The Hang Seng China Enterprises Index dropped as much as 2% on Wednesday, taking its losses from a Jan. 27 peak to over 20%. Meituan and Alibaba Group Holding Ltd. were the biggest drags. The gauge is on track to post the worst monthly performance since February, having lost about 8% so far.

Miserable May Is Dashing Hopes for a Rebound in Chinese Stocks

Data Wednesday showed China’s manufacturing activity contracted for a second straight month in May, offering the latest proof that the post-Covid recovery in the world’s second-largest economy is stalling.

“The data will surely have some negative impact on the market, but this is not entirely surprising and the market has already priced in some of the weakness,” said Yan Kaiwen, an analyst at China Fortune Securities. “But the room for a further slide will be limited.”

Geopolitical risks are also hurting sentiment. The US accused China of an “unnecessarily aggressive maneuver” after a Chinese fighter jet swerved in front of a US reconnaissance aircraft over the South China Sea. Beijing also recently declined a request from Washington for the countries’ defense chiefs to meet this week.