Chinese shares erased their gains for the year and metals prices fell amid mounting concerns over the outlook for the country’s economy and the possibility of an unprecedented US debt default.
China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks fell as much as 1.1 per cent on Wednesday, pushing the index’s year-to-date losses to about 2 per cent when accounting for the renminbi’s depreciation against the dollar. In Hong Kong, the Hang Seng China Enterprises index fell as much as 1.9 per cent.
In commodities markets, Chinese iron ore futures in Dalian dropped as much as 4.5 per cent to Rmb683.5 a tonne, while copper contracts on the London Metal Exchange fell as much as 1.4 per cent to $7,988 a tonne, according to Bloomberg figures, dropping below the $8,000 threshold for the first time in almost six months.
The latest falls for Chinese stocks and commodities follow disappointing economic figures suggesting the country’s recovery from stifling zero-Covid restrictions has begun to stall. Official data this month showed record joblessness among Chinese youth, with one in five unemployed.
“Most investors are not confident about the outlook for the Chinese market,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. Wong said the Chinese government “really can’t do anything about youth unemployment at the moment”.
“Teenagers don’t want to work in the countryside or at factories, they want to work at Alibaba or Tencent,” he added, “but Chinese tech companies are reducing their workforces now.”
Alibaba shares were down 2.3 per cent on Wednesday after the company announced it was cutting 7 per cent of staff at its cloud business.
Elsewhere in the region, Japan’s Topix index — which this month hit its highest point since 1990 — shed 0.4 per cent, and Australia’s S&P/ASX 200 fell 0.5 per cent.
The losses in Asia-Pacific equities came on the heels of a sell-off on Wall Street after policymakers in Washington failed to lock in a deal to raise the debt ceiling, with less than two weeks before the US government is due to default.
The lack of any tangible progress from talks between US president Joe Biden and Republican House Speaker Kevin McCarthy pushed the benchmark S&P 500 index down 1.1 per cent, while the tech-focused Nasdaq Composite shed 1.3 per cent.
In currencies, the New Zealand dollar fell 1.6 per cent against the US dollar after the country’s central bank lifted its benchmark interest rate by 0.25 percentage points but appeared to rule out further rate rises.
“Going by the RBNZ’s updated forecasts for the official cash rate, the bank is already done tightening,” economists at Capital Economics wrote in a note following the bank’s decision to raise rates to 5.25 per cent.
Futures markets tipped the FTSE 100 to shed 0.8 per cent at the open, while the S&P 500 was expected to fall 0.1 per cent when trading begins on Wall Street later in the day.