Shanghai stock index steady after 1% slide as Middle East tensions weigh

HONG KONG: China and Hong Kong stocks tumbled on Monday, joining a broader sell-off in the region, as the escalating conflict in the Middle East continued to dent risk appetite.

The Shanghai Composite Index lost as much as 1% before recouping the losses and trading 0.2% higher to 3,922.72 at the midday trading break.

The blue-chip CSI 300 Index declined 0.2%.

Hong Kong benchmark Hang Seng was down 0.9%, and the Hang Seng Tech Index lost 1.7%.

Broader Asian equities also slid on Monday; MSCI’s Asia ex-Japan stock index was weaker by 1.5% and Japan’s Nikkei index was down 3.4%.

Hopes of Gulf peace talks were overshadowed by uncertainties as the US builds up ground troops, while attacks on Israel by Yemen’s Iran-aligned Houthis further complicated the war.

“With Middle East tensions rising over the weekend, markets now face headwinds from both geopolitical risks and weak technical signals, making a sharp turnaround unlikely for the near term,” analysts at Nanhua Futures said in a note.

Still, expectations of supportive domestic policy measures provide a floor, and downside is limited following previous corrections at the beginning of the year, Nanhua analysts added.

The benchmark Shanghai Composite Index has slipped 6.7% so far in March, which has largely wiped out all the year-to-date gain and put the index on track for the worst monthly drop since January 2024.

However, Chinese equities still prove to be more resilient compared with other markets in the region, and that relative outperformance is set to become increasingly pronounced as the war drags on, analysts at BNP said in a note.

The bank maintains its preference for China’s materials, industrials, and technology sectors within the medium- to longer-term horizon.

Among best performers, the gold sector index added 2.8%, the defences sector index climbed 1.3% and the energy sector added 1.1%.

The CSI New Energy Index declined 1.6%.‑Reuters