China, HK stocks decline as sentiment hit by global bond selloff

China and Hong Kong stocks experienced declines on Wednesday due to a global bond selloff and increasing oil prices, which negatively impacted investor sentiment. China’s CSI 300 Index dropped 1.3%, while the Shanghai Composite Index fell by 0.8%. The Hong Kong Hang Seng benchmark declined by 1%. These losses mirrored the overnight drop on Wall Street, as the 10-year US Treasury yield reached its highest level since 2023.

This prompted investors to anticipate a potential US interest rate hike in September, amid rising tensions in the Middle East that drove up oil prices.

Gold equity stocks experienced the steepest decline, falling 3% due to gold's sensitivity to interest rate changes. Meanwhile, automobile shares dropped nearly 2% following China's unveiling of guidelines promoting fair competition overseas. Most sectors, including technology, new energy, and real estate, suffered losses by midday, while defense stocks outperformed.

The Hang Seng Tech Index in Hong Kong saw a decline of 1.5%. Additionally, online fast-fashion retailer Shein faced a weak performance in Hong Kong due to a disappointing debut during its initial public offering on Tuesday. This contributed to a 2.2% drop in Shein's stock by lunchtime, as concerns grew over tariffs on small packages.

Analyst Gary Ng of Natixis commented that the market currently values AI firms more highly, making Shein's situation more challenging due to the aforementioned issues. Geopolitically, Premier Li Qiang stated during a meeting with a US-China Business Council delegation in Beijing that US firms are encouraged to expand and deepen their presence in China's market.