SHANGHAI: Chinese stocks fell in the first week of 2024, as traders gauged concerns over the country’s sluggish recovery from the COVID-19 pandemic and signs of deflationary pressure.
The blue-chip CSI 300 Index closed down 0.5%, while the Shanghai Composite Index declined 0.9% on Friday. Hong Kong’s Hang Seng Index and the Hang Seng China Enterprises Index lost roughly 0.7% each.
For the week, the CSI 300 and the Hang Seng both lost 3%, with the CSI 300 booking its worst week since Oct. 20. Broader Asian stock markets slipped, keeping global equities on track to snap a nine-week winning streak.
The US dollar was set for its strongest weekly advance since mid-July, as traders eased bets of an aggressive rate cut by the Federal Reserve. “China’s macro picture remained broadly unchanged over the past month: sluggish near-term economic growth momentum with limited concrete easing measures,” said Goldman Sachs in a note.
Shares of healthcare, artificial intelligence and defence security fell between 2% and 3%. Hong Kong-listed tech companies lost 1.7%, with Alibaba down 3.2%.
Stocks fell despite expectations of rate cuts, which supported bond prices, underscoring weak sentiment in the stock market. Yields on the benchmark 10-year government bond ,, fell to 2.525%, the lowest since April 2020. Yields have an inverse relation with bond prices.
“In light of large banks lowering deposit rates and the more dovish Fed, we expect the PBOC to cut policy rates in Q1 and Q3 by 10 basis points (bps) each, and reserve requirement ratio in Q2 and Q4 by 25 bps each,” Goldman Sachs said.
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