Chinese stocks extend losses as regulators move to cool market

HONG KONG: Chinese stocks edged lower on Thursday, as sentiment weakened after regulators took measures in the previous session to cool the market.

• As of the midday trading break, the benchmark Shanghai Composite Index declined 0.6% to 4,101.52, on track for its third session of losses to further pull back from a decade-high.
• The blue-chip CSI 300 Index was down 0.2% after swinging between gains and losses during the morning session.
• In Hong Kong, the Hang Seng Index declined 0.6% and the tech index dipped 1.8%.
• The declines have paused a stellar year-start rally, as regulators tightened margin requirements on Wednesday in a surprise move to cool a red-hot stock market that saw turnover and leverage bets hitting records.
• “We may see some near-term volatility, especially in the tech- and innovation-heavy sectors where we see the most margin financing growth,” analysts at Morgan Stanley said.
• However, the impact should be temporary and manageable, and regulators’ commitment to a “slow-bull” should “tame the market without causing a material impact on market liquidity,” they added.
• Leading market losses on Thursday, the CSI Satellite Industry Index tumbled more than 8% after several commercial aerospace concept stocks warned of excessive trading risks.
• Among other laggards, the defence sector lost 3.8% and AI-related shares declined 1.6%.
• “We are still uncertain whether this is an isolated issue but believe there is likely more government oversight on the issue, similar to its actions in the past,” said Kai Wang, a senior equity analyst at Morningstar.
• Alibaba declined 3%. The company launched upgrades to its Qwen artificial intelligence app which more aggressively pushes into consumer-facing AI.