SHANGHAI, – China stocks struggled for direction on Friday as traders gauged concerns over the country’s sluggish recovery from the pandemic and signs of deflationary pressure, while government bonds gained on the prospect of more stimulus to revive the economy.
** The blue-chip CSI 300 Index edged up 0.2%, while the Shanghai Composite Index edged 0.1% lower by the midday recess on Tuesday.
** Hong Kong’s Hang Seng Index and the Hang Seng China Enterprises Index dipped 0.1% each.
** Tracking lacklustre global equities, broader Asian stock markets slipped and were poised to snap a nine-week winning streak.
** The U.S. dollar was set for its strongest weekly advance since mid-July as traders eased bets of an aggressive rate cut by the Federal Reserve.
** “China’s macro picture remained broadly unchanged over the past month: sluggish near-term economic growth momentum with limited concrete easing measures,” said Goldman Sachs in a note.
** Shares of artificial intelligence and defence security both fell more than 1%, while financials and property developers gained roughly 1% each.
** In Hong Kong, tech giants lost 1.1%, with e-commerce giant Alibaba down 3%.
** Stocks fell despite expectations of rate cuts, which supported bond prices, underscoring weak sentiment in the stock market.
** Yields on the benchmark 10-year government bond ,, fell to 2.525%, the lowest since April 2020. Yields have an inverse relation with bond prices.
** “In light of the latest news on large banks lowering deposit rates and the more dovish Fed, we expect the PBOC to cut policy rates in Q1 and Q3 this year by 10 basis points (bp) each, and to cut reserve requirement ratio (RRR) in Q2 and Q4 this year by 25 bp each,” Goldman Sachs said.
(Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips)