China: Stocks fall as factory, services activities contract amid Covid outbreaks

[SHANGHAI] China stocks fell on Thursday (Mar 31) after data showed activity in China's factory and services sectors swung into a negative territory in March, contracting simultaneously for the first time since the peak of the country's Covid-19 outbreak in 2020.

The CSI300 index fell 0.5 per cent to 4,231.87 at the end of the morning session, while the Shanghai Composite Index lost 0.1 per cent to 3,263.19 points.

The Hang Seng index dropped 0.8 per cent to 22,052.49. The Hong Kong China Enterprises Index lost 0.7 per cent to 7,558.62.

The official manufacturing Purchasing Managers' Index (PMI) fell to 49.5 from 50.2 in February, while the non-manufacturing PMI eased to 48.4 from 51.6 in February.

The world's second-largest economy is now at the risk of slowing sharply as authorities restrict production and mobility in many cities, including Shanghai and Shenzhen, to stamp out a rash of Covid-19 outbreaks.

"Markets so far have underestimated the severity of the situation in China because it is difficult to fully reconcile and understand," said Nomura analysts in a note. "In the next couple of months, we expect global investors to better reflect these shocks in their valuations of various asset classes."

China will rollout policies to stabilise the economy as soon as possible, as the downward pressure in the economy increased, state media CCTV quoted a cabinet meeting as saying on Wednesday.

The country will refrain from introducing measures not conducive to stabilise market expectations, the meeting also said.

Semiconductors went down 2.4 per cent, information technology firms lost 1.7 per cent, and new energy stocks slumped 3.3 per cent.

Real estate developers gained 2.8 per cent and banks added 1.6 per cent. The central bank is expected to cut rates and lower reserve requirements for banks as downward economic pressures build.

In Hong Kong, Baidu dropped 4 per cent after US added the search engine giant, along with other 4 companies, to the latest batch of stocks potentially facing delisting from the US.

China's securities regulator said on Thursday both China and the United States have a willingness to solve their audit disputes, and the outcome depends on the wisdom of both parties.

The Hang Seng Tech Index retreated 1.3 per cent. REUTERS