SHANGHAI: China stocks were flat on Monday, the last day before the Lunar New Year holiday, as a surprise contraction in manufacturing activity and lingering concerns about US tariffs offset the optimism from government efforts to introduce long-term capital.
China, HK stocks rise after Trump says conversation with Xi ‘friendly’
However, in Hong Kong, tech shares led the market higher.
China's blue-chip CSI300 Index had edged up 0.1% by the lunch break, while the Shanghai Composite Index gained 0.3%. Hong Kong's Hang Seng Index rose 0.9%.
China's manufacturing activity unexpectedly contracted in January, its weakest showing since August.
"Part of the slowdown may be due to weaker external demand as the new export orders index dropped to the lowest level since March last year," said Zhiwei Zhang, president of Pinpoint Asset Management.
Meanwhile, US President Donald Trump's threats to impose tariffs and sanctions on Colombia --- now on hold after a deal was reached -- reminded investors that Trump is serious about his tariff pledges.
(The) "Tariff risks might have been delayed, but not derailed," Morgan Stanley said in a note, estimating that weighted average tariff rate on China will rise from 10% at the end of 2024 to 26% by the end of 2025 and 36% in 2026.
These concerns dampened the excitement from signs that institutional money is starting to flow into the stock market after Beijing set specific targets last week to introduce long-term capital from insurers and mutual funds.
Three insurers, including China Pacific Insurance and Taikang Life, got regulatory approval to invest 52 billion yuan ($7.16 billion) into stocks via a newly-established fund, state media reported.
Due to continued fiscal and housing policy undershoot, "we advise investors to exercise caution, and continue to favor ... stocks with stable cash returns and dividend yields," Morgan Stanley said.
Big data stocks jumped on excitement around DeepSeek, a Chinese AI lab whose cutting-edge model stunned the world.
But other tech stocks, including robots, chipmaking and cloud computing, fell.
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