Tech shares drag China stocks lower as US yields rise
SHANGHAI: China stocks fell on Thursday as traders returning from a week-long holiday faced renewed geopolitical tensions, higher global yields, and a looming earnings season that threatens still-lofty valuations of Chinese tech shares. China’s stock benchmarks are now near where they were two years ago, when a stimulus bonanza from Beijing lit up share prices and boosted hopes for a slow bull -…
China stocks declined on Thursday as traders returned from a week-long holiday, confronting renewed geopolitical tensions, higher global interest rates, and an upcoming earnings season that could challenge the already inflated valuations of Chinese technology shares. The country's stock indices are currently close to their levels from two years ago, following a stimulus surge from Beijing that inflated share prices and prompted bullish expectations, but those hopes are now waning in a three-month decline.
The CSI300 Index dropped 0.4% at the start of trading, hovering close to a one-year low and down about 15% from its June high. The Shanghai Composite Index fell 0.3%, while the tech-focused STAR 50 Index slipped nearly 4%. In Hong Kong, where the market tumbled nearly 2% during China’s National Day break, the Hang Seng Index slipped another 2% on Thursday.
Wang Zhuo, a partner at Shanghai Zhuozhu Investment, attributed the excessive optimism towards "hard tech" shares like chipmakers in the first half to inflated valuations, noting that "bubbles would inevitably burst." The STAR 50 Index, which had plummeted more than a third since July 1, still trades at around 100 times earnings.
Market sentiment is also being tempered by renewed Sino-US tensions, as optimism from the recent Sino-US summit between Donald Trump and Xi Jinping appears to be fading. Taiwan's representative in Washington affirmed on Wednesday that relations with the United States remain strong following the previous month's meeting. Additionally, the Federal Communications Commission announced on Wednesday its intention to vote on October 29 to prohibit all Chinese laboratories from testing electronic devices for use in the US, escalating a previous restriction targeting Beijing.
Traders are also keeping a close eye on the Sino-EU trade negotiations this month, as China has reportedly refused an EU request for voluntary restrictions on hybrid car exports. A further blow to investor sentiment came as China Securities reported that, despite a reduced likelihood of another US rate hike this month, rapidly rising 30-year US Treasury yields will persistently weigh on Chinese stocks.
Among the worst-performing sectors, technology shares led the decline on Thursday, while energy, real estate, and banking shares experienced gains.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
