(Bloomberg) – New volatility is hitting Chinese stocks, evoking memories of the 2018 slump as war in Ukraine threatens to complicate the Asian nation’s plans to ease policy and potentially worsen its already strained relations with foreign countries. United States
Bloomberg’s Most Read
Traders were taken for a wild ride on Wednesday as stock indexes in China and Hong Kong both fell more than 3% in the early afternoon, only to pare the bulk of those losses at the close. . Still, the CSI 300 index ended down 0.9% in a sixth day of decline – the longest losing streak since March 2020, and the Hang Seng index ended at its lowest since July. 2016.
There are growing fears that soaring commodity prices are stoking inflation and limiting China’s central bank’s ability to ease policy. Worried about the impact the price spike will have on the economy, China is reportedly considering buying or increasing stakes in Russian energy and commodities companies, moves that could heighten tensions with states -United.
Separately, the United States could take “devastating” action against Chinese companies that defy Russian sanctions, The New York Times reported, citing Commerce Secretary Gina Raimondo. In 2018, the CSI 300 index lost around a quarter of its value in a rout triggered by the Sino-US trade war.
“It’s really similar to what happened in 2018,” said Chen Shi, fund manager at Shanghai Jade Stone Investment Management Co. exacerbated. Investors react with more extreme sentiment when panic is in the air.
The CSI 300 is down 27% from a peak about a year ago, fueled by a slump in China’s property market and the Covid-zero policy. Sentiment deepened further on Wednesday when Norway’s $1.3 trillion sovereign wealth fund announced its exclusion from Li Ning Co. over concerns the sportswear maker could contribute to serious human rights abuses. in Xinjiang. The move fueled concerns about a potential pullout by other long-term investors. Li Ning plunged 9%.
“The unloading of Norwegian sovereign wealth fund Li Ning raises concerns about the attitude towards Chinese and Hong Kong equities going forward,” said Castor Pang, head of research at Core Pacific Yamaichi.
Meanwhile, China’s producer price index rose 8.8% from a year earlier, against estimates of 8.6%, official data showed today. Goldman Sachs Group Inc. economists had expected China’s economy to grow just 4.5% this year, one percentage point below the gross domestic product target of around 5.5 % set last week. Covid infections topped 500 for a third straight day on Wednesday, with cases rising in major cities like Beijing and Shanghai.
“Many factors are at play here: Covid is peaking in China, inflation is higher than expected, and the overnight news that China may be considering investing in Russian assets. This increases the risks of a global response against China,” said Bloomberg Intelligence strategist Marvin Chen.
Cracks are also appearing in the Chinese bond market. Yields on 10-year sovereign bonds hit 2.86%, the highest this year, as Commerzbank AG economist Hao Zhou pointed to capital outflows.
READ: Chinese sovereign bonds fall from top spot as funds leak
“We don’t see any rebound signal at the moment,” said China Fortune Securities analyst Yan Kaiwen. The market is worried about inflation due to rising oil and other commodity prices, which will negatively impact the global economy, he said.
The Hang Seng index ended down 0.7%, taking its loss this week to nearly 6%.
Investors remain nervous in the struggling Hong Kong stock market, which was the world’s worst-performing major indicator last year after a year-long regulatory crackdown. HSI’s price-to-pound ratio hit new lows as a continued rise in Covid cases and an impending citywide lockdown added to negative sentiment, investors said.
Bloomberg Businessweek’s Most Read
©2022 Bloomberg LP