China stocks slump to new lows on Sino-US tech woes, US debt ceiling anxiety

HONG KONG: China’s blue chip index wiped out all of its 2023 gains while Hong Kong’s key benchmark tumbled to a near six-month low, as a widening US-China trade and technology dispute added to already weak sentiment around U.S debt ceiling negotiations.

By midday, China’s CSI 300 Index slipped 0.46%, while the Shanghai Composite Index declined 0.66%.

In Hong Kong, the Hang Seng Index lost 2.07% while the Hang Seng China Enterprises Index slumped 2.27%, with tech stocks including Tencent and Meituan leading the decline.

The sell-off in tech shares has accelerated recently on concerns over an escalating Sino-US dispute over technology, broadening a long-standing trade dispute between the two powerhouse economies.

Earlier this week, a US lawmaker urged the US Commerce Department to put trade curbs on Chinese memory chip maker Changxin Memory Technologies after Beijing’s ban on the sale of some chips by US-based Micron Technology Inc.

Adding to the gloom, Japan plans to tighten controls on semiconductor exports to China.

“The sell-off looks like a Deja Vu of October last year,” Yuan Yuwei, a hedge fund manager at China-based Water Wisdom Asset Management.

“The reason this time could be investors shifting capital to Japan as US accelerates the restructuring of its supply chain.”

China shares edge down on weak sentiment

Both Chinese and Hong Kong markets have been under pressure over recent weeks due to mounting evidence of weakness in China’s economy, with April data showing the Asian giant was already past its post-pandemic boost.

China’s currency wasn’t spared the selling either, with the offshore yuan slipping to 7.0827 per dollar earlier for the first time since December 2022.

Concerns over the slow progress in raising the US debt ceiling, which has raised the risk of a damaging US government default, have also hobbled overall market sentiment.

“We haven’t seen anything concrete (on debt ceiling), markets are going to fret even more so,” said David Chao, global market strategist (Asia Pacific) at Invesco.