China stocks recover lost ground as global risk appetite sours

SHANGHAI: China stocks recovered lost ground and were largely flat by midday on Wednesday, with gains in photovoltaic and coal shares offsetting jitters after an overnight sell-off on Wall Street.

CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs on Tuesday cautioned that equity markets could be heading toward a drawdown, underscoring growing concerns over sky-high valuations and evoking memories of the dot-com boom and crash.

At the midday break, the Shanghai Composite index edged up by 0.05% at 3,962.04 points after falling nearly 1% earlier in the session.

The blue-chip CSI300 index was down 0.07%.

The recovery was led by photovoltaic shares, with a sub-index tracking the industry finishing the morning up 2.54%.

Coal stocks also lent support, with the CSI SWS Coal index gaining 1.15%.

Hong Kong shares also trimmed losses, with the benchmark Hang Seng Index down 0.28% at the midday break, while the city’s tech index lost 0.8%.

“The lack of a single clear catalyst suggests that investor caution is being driven by a combination of macroeconomic uncertainties, including concerns about growth prospects, ongoing government shutdown negotiations in the US, and heightened scrutiny of capital expenditure in key industries,” said Shier Lee Lim, lead forex and macro strategist for APAC at Convera.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.99% while Japan’s Nikkei index was down 3.30%.

Chinese Premier Li Qiang said trade restrictions have created barriers to doing business and that Beijing would work to reform the global economic and trading system and make trade rules fairer, more reasonable and transparent.

Separately, market participants will shift their attention to China’s economic data for more clues on the health of the economy.

China’s services activity expanded in October but at its slowest pace in three months, as a decline in overseas orders offset the boost from improved domestic demand, a private survey released on Wednesday showed . China is due to release trade data on Friday and inflation figures on Sunday.

Credit lending and activity indicators are scheduled for next week.

“Any further deterioration in data going forward may trigger policy stimulus,” said analysts at ANZ.

“A reserve requirement ratio (RRR) cut appears more likely than an interest rate reduction as deflationary pressure seems to have improved recently.”