China, HK stocks decline as Sino-US tensions rise

BEIJING: China and Hong Kong stocks fell on Friday, weighed down by rising Sino-US tensions, waning excitement over post-COVID recovery, and cooling interest in ChatGPT-concept stocks.

China’s blue-chip CSI300 Index fell 0.6% by the lunch break, while the Shanghai Composite Index dipped 0.3%. Hong Kong benchmark Hang Seng tanked roughly 2%, as tech shares tumbled.

The United States will explore taking action against entities connected to China’s military that supported the flight of a Chinese spy balloon into US airspace last week, a senior State Department official said on Thursday.

The US is conducting a post-mortem on the wreckage of the balloon, and “one can sense the impending storm in Washington,” John Browning, Managing Director of BANDS Financial wrote in a note. “Certainly, more sanctions will follow.”

Meanwhile, data released on Friday showed that China’s January factory gate prices fell more than economists expected, suggesting that flashes of domestic demand — that had stoked consumer prices after the zero-COVID policy ended — are not yet strong enough to rekindle upstream sectors.

“While local investors agreed overall economic growth would recover this year, there appeared to be a lack of conviction on the magnitude of the rebound,” Goldman Sachs wrote in a report on Friday.

Julian Evans-Pritchard, head of China Economics at Capital Economics, expects China’s central bank to cut policy rates as soon as next week to bolster the economy further.

China’s tech-focused STAR Market dropped 1.2%, while Hong Kong’s Hang Seng Tech Index slumped 4.7%, amid media reports that the Joe Biden administration is poised to introduce new restrictions on US companies funding the development of advanced computing technologies in China.

China’s Artificial Intelligence (AI) Index fell 1.2% from 10-month highs on Friday. Hanwang Technology Co Ltd, widely seen as a bellwether of Chinese interest in ChatGPT-concept stocks, tumbled nearly 6% after disclosing that several major shareholders reduced stakes over the past few days.