Thursday, February 2

China stocks fall as COVID cases, cenbank stance dent sentiment


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SHANGHAI — China stocks fell on Tuesday as the central bank stood pat on an interest rate, defying market expectations of further monetary policy easing, while surging coronavirus cases threatened to dampen growth in the world’s second-largest economy.

The Ukraine crisis also continued to weigh on sentiment. The United States said it was concerned about China’s alignment with Russia, with investors focusing on talks between Washington and Beijing.

The CSI300 index fell 1.4% to 4,118.12 points, while the Shanghai Composite Index lost 1.9% to 3,162.96 points.

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The Hang Seng index dropped 2.2% to 19,103.04 points. The Hong Kong China Enterprises Index lost 2% to 6,426.40.

The People’s Bank of China said it was keeping the rate on 200 billion yuan ($31.44 billion) worth of one-year medium-term lending facility loans to some financial institutions unchanged at 2.85% from the previous operation.

Mainland China posted a steep jump in daily COVID-19 infections recently, with new symptomatic cases on Tuesday more than doubling from a day earlier to a two-year high.

China’s southern technology hub of Shenzhen suspended public transport including buses and subways from Monday, prompting manufacturers such as Apple suppliers Foxconn and Unimicron Technology Corp to suspend operations. The financial hub of Shanghai locked down some housing and office compounds.

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“China’s economy could be severely hit again,” said Nomura analysts in a note. “With the much-worsening pandemic and Beijing’s resolution in maintaining its zero-COVID strategy, we believe China’s ‘around 5.5%’ GDP growth target this year is becoming increasingly unrealistic.”

US national security adviser Jake Sullivan on Monday raised concerns about China’s alignment with Russia in a seven-hour meeting with Chinese diplomat Yang Jiechi as Washington warned of the isolation and penalties Beijing will face if it helps Moscow in its invasion of Ukraine.

After the talks ended, the White House issued a short statement, saying Sullivan raised a “range of issues in US-China relations, with substantial discussion of Russia’s war against Ukraine.”

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China’s official Xinhua news agency cited Yang as saying that Beijing was committed to promoting negotiations to resolve the Ukraine conflict.

Tech giants listed in Hong Kong lost roughly 1% after tumbling as much as 7.2% in early morning trade.

JPMorgan Chase & Co. downgraded 28 Chinese stocks listed in the United States and Hong Kong on Monday, sending the Nasdaq Golden Dragon China Index down nearly 12% overnight.

“We find China Internet unattractive on a 6-12 month view with an unpredictable share price outlook, depending on the market perception of China’s geopolitical risks, macro recovery and Internet regulation risk,” said JPMorgan Chase & Co. in a note.

The Hang Seng Tech Index has lost roughly 15% since last Friday, after the US Securities Exchange Commission identified Chinese companies that will be delisted if they do not provide access to audit documents.

(Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips)

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