CNBC's The China Connection newsletter: How a gold-buying spree helps the yuan go global
Plans to develop a gold trading hub in Hong Kong coincide with China's growing gold reserves.
China's stock market faced a decline on Monday, with investors unnerved by higher global interest rates and escalating geopolitical tensions. The US government's probe into tech firms such as Luxshare Precision Industry and Foxconn Industrial Internet further dampened risk appetite. Market analysts pointed to the rise in global yields as the primary cause for concern, while also highlighting the potential risk of a debt crisis in economically weaker European governments.
China's CSI300 Index dropped 0.2% in the morning, hovering close to a one-year low, and the Shanghai Composite Index fell 0.1%. Hong Kong's Hang Seng Index, however, showed a slight increase of 0.2%. The market's reaction was relatively subdued after a seminar held by China's chief securities regulator Wu Qing on Saturday, where he sought input from market participants on ways to enhance the capital market.
Regulators also released draft rules on Friday that would lower the threshold for establishing equity mutual funds, showcasing government support. However, the market has been plagued by the looming threat of rising bond yields due to the escalating war in the Middle East, which has driven oil prices up, intensifying inflation worries.
Investors are also apprehensive about potential trade war repercussions with trading partners, fearing that it could negatively impact Chinese exports, which have historically been a bright spot in China's otherwise imbalanced economy. European Trade Commissioner Maros Sefcovic announced on Friday that China and the European Union had agreed on a deal that could reduce Chinese exports of hybrid cars to the bloc by over half.
Tech stocks in China faced a tough day on Monday, with Luxshare and Foxconn among the hardest hit following US patent infringement investigations against the two companies. Foxconn's share price plummeted as much as 7% to a six-month low, while Luxshare plummeted 2%, nearing its lowest level since March. Consumer electronics, telecommunication, and real estate sectors experienced significant losses in China, while banks and consumer stocks gained ground.
In Hong Kong, banks and biotech stocks saw an uptick, whereas chipmakers and AI stocks experienced declines.
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