China, Hong Kong shares drop as US-Iran peace talks collapse, blockade looms

HONG KONG: China and Hong Kong stocks weakened on Monday, joining a broader equity sell-off in Asia, as the collapse of US-Iran peace talks dampened risk appetite across the region.

The Shanghai Composite Index lost 0.2% to 3,979.26 by the lunch break, and the blue-chip CSI300 Index weakened 0.1%, both clawing back from the steep losses at the opening hour.

Hong Kong benchmark Hang Seng lost 1.2% to 25,587.26.

The Hang Seng Tech Index was down 1%. Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.2%.

The US military said it will begin a blockade of all maritime traffic entering and exiting Iranian ports and coastal areas on Monday after weekend talks failed to reach a deal to end the war with Iran, jeopardizing a fragile two-week ceasefire.

“Ongoing geopolitical tensions are making it hard for the market to break out of its current slump,” analysts at Soochow Futures wrote in a note.

“High volatility and choppy, range-bound trading are likely to persist for the near term.”

Still, China’s broader domestic economic recovery remains intact with factory-gate prices rising for the first time in more than three years in March, they added.

“China looks relatively attractive given the domestically orientated nature of its economy and equity markets, as well as valuations and risks to current earnings expectations,” analysts at BNP Paribas said in a note.

“If the situation remains uncertain and energy prices stay elevated, then we would expect this outperformance to continue.”

Among the winning sectors, the CSI New Energy Index added 1.1% and the CSI New Energy Vehicle Index climbed 0.9%.

The CSI 300 Energy Index gained 0.3%.

The CSI AI Index added 0.4% on optimism that TSMC is likely to book its fourth straight quarter of record profit on insatiable AI demand.

Weighing on the markets, the CSI Oil and Gas Industry Sub Index lost 1.7%, and the liquor makers were down 0.9%.‑Reuters