China stocks’ weak return from break highlights growth concerns

CHINESE stocks slid on its return from a 3-day break, in a sign that Beijing’s vow to boost growth has failed to alleviate concerns about strict Covid lockdowns and gloomy economic data. 

The benchmark CSI 300 Index ended 0.2 per cent down on Thursday (May 5), following a mildly choppy session. Weighing on the market was an 8.2 per cent decline in battery giant Contemporary Amperex Technology on disappointing earnings, as well as Hangzhou Hikvision Digital Technology that tumbled 10 per cent on the risk of fresh US sanctions.

The lacklustre closing came on the back of a slew of data showing a sharp contraction in the world’s No 2 economy, ranging from weak services and factory activity to a plunge in domestic travel spending. A delay in Shanghai’s final exit from a 5-week lockdown and fresh regulatory headwinds from Washington unsettled investors further.  

The overnight rally on Wall Street did little to improve sentiment in China, suggesting that the Federal Reserve’s latest interest rate hike and signalling of more to come this year continue to raise concerns about the allure of local assets.   

“Investors remain cautious about the market. The main concern still surrounds the impact of lockdowns on the economy,” said Banny Lam, head of research at CEB International Investment. “Other concerns include Chinese enterprises’ delisting issue in the US.” 

The market’s weak performance shows investors are waiting for policymakers to put words into action after they made sweeping pledges to spur a faltering economy last week. The authorities vowed to deploy more policy tools and ramp up infrastructure construction. 

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Beijing also took pains to ease fears of an extended crackdown on private enterprise, especially on its once high-flying technology firms. In the latest of such efforts, China’s central bank said it will implement “normalised” supervision on the financial activities of online platform companies, adding that support for technology innovation companies should be strengthened. 

Elsewhere, the onshore yuan weakened 0.2 per cent against the US dollar at 6.6194, while its offshore counterpart fell 0.4 per cent to 6.6500. Yields on China’s benchmark 10-year government bond shed one basis point to 2.83 per cent.

In credit markets, Chinese onshore corporate bonds were broadly mixed after early gains. Junk dollar notes advanced, with higher-rated developers some of the best performers. BLOOMBERG