China, HK stocks down as escalating Middle East conflict sap sentiment

SHANGHAI: China and Hong Kong stocks fell on Thursday as investor risk appetite waned amid little sign that the United States-Israel and Iran will quickly end hostilities in the Middle East.

China’s blue-chip CSI300 Index dropped 1% by the lunch break, while the Shanghai Composite Index lost 0.6%.

Hong Kong benchmark Hang Seng was down 1.2%.

Energy shares outperformed, with onshore and offshore energy gauges up 2.3% and 2.8%, respectively, and the Coal Index gaining 4.1% after Brent crude jumped past $100 a barrel.

Iran set ablaze two tankers in Iraqi waters as it stepped up attacks on oil and transport facilities across the Middle East, warning the world should be ready for oil at $200 a barrel in defiance of President Donald Trump’s claim that the US had already won the war.

UBS analysts said in a client note that investors generally see a dramatic oil spike, such as $200 per barrel, as unlikely without a major disruption.

They added that investors have been taking profits on war-linked metals trades, including copper and aluminium, while selectively adding to undervalued stocks on the view that most macro risks are priced in and any easing in geopolitical tensions could support a gradual recovery in valuations.

Onshore non-ferrous metal shares fell 1.6%, while artificial intelligence stocks slipped 1.4%.

The CSI Rare Earth Index fell 2%.

Hong Kong shares of Guotai Junan International and Citic Securities fell 5% and 3%, respectively, after media reported Hong Kong authorities had raided the two brokerages this week.‑Reuters