HONG KONG: China and Hong Kong stocks fell on Monday, weighed down by the rising odds of fewer US interest rate cuts and the widening US-China yield gap.
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At the midday break, the Shanghai Composite index was down 0.45% at 3,154.37 points.
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China’s blue-chip CSI300 index was down 0.47%, with the financial sector sub-index lower by 0.8%.
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The consumer staples sector was up 0.11%, the real estate index has gained 0.86% and the healthcare sub-index rose 0.23%.
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The Hang Seng Index slid 1.35% to 18,807.68, set for a six-day losing streak. The Hang Seng China Enterprises Index fell 1.14%.
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Tech giants dropped 1.38%, leading the decline.
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The sell-off followed strong US jobs data on Friday that dealt a blow to hopes for more rate cuts and triggered a broad correction on Wall Street.
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China’s 10-year bond yield has tumbled over 100 basis points in a year to be around 1.6%, with the spread to US Treasury yields the widest in 24 years.
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This increasing gap, driven by the drop in Chinese yields, has visibly increased market pressure, CICC analysts said in a note.
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They expect trading to be range-bound in the short term due to caution over Hong Kong stocks.
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On the macro data front, China’s exports gathered pace in December, while imports recovered, closing out the year on a positive note as the world’s second-largest economy braces for mounting trade risks with the incoming US administration.
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“The market pullback may have more to go heading into the US Presidential inauguration on Jan. 20, with the dollar’s strength and a ‘high for longer’ outlook,” JPMorgan analysts, led by Wendy Liu, said in a note.
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The smaller Shenzhen index was down 0.25%, the start-up board ChiNext Composite index was higher by 0.12% and Shanghai’s tech-focused STAR50 index was down 0.87%.
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Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.47% while Japan’s Nikkei index was down 1.05%.
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