China stocks dip, Hong Kong shares slide from six-week high as Shanghai reopens after two-month lockdown

  • Shanghai Composite slips by less than 0.1 per cent at the trading break after changing directions at least six times during the morning
  • The Hang Seng Index slides 0.7 per cent in morning trading and is set to snap a three-day rally

China’s main equity gauge fluctuated between gains and losses on Wednesday morning, as traders waited for more signs of a return to normalcy in the country’s biggest commercial city, after Shanghai finally lifted its two-month long lockdown. Hong Kong stocks fell from a six-week high.

The Shanghai Composite Index slipped by less than 0.1 per cent to 3,185.77 at the trading break after changing directions at least six times during the morning. The Hang Seng Index slid 0.7 per cent to 21,255.84, and was set to snap a three-day rally that has driven the benchmark up by 6.5 per cent. The Hang Seng Tech Index lost 1.7 per cent.

Consumer discretionary and industrial stocks gained on the mainland market, while energy producers dropped by the most among industry groups.

Shanghai ended the lockdown for all of its 2.67 million businesses – from corner shops to multinational manufacturers – but investors were fretting over a full recovery from affects of the pandemic and expected the path would be bumpy. JPMorgan and Swiss private bank UBP had earlier forecast that growth in China’s economy will be negative this quarter because of the disruption to production and weaker consumer spending.

“I expect a continued recovery in consumer activity due to declining new infections and easing restrictions across the country,” said David Chao, a strategist at Invesco in Hong Kong. “The government’s recent monetary and fiscal support measures should also stabilise growth and add fuel to economy’s main propellers. It’s possible that we’re seeing early signs of the economy slowly clawing its way towards a rebound in the second half, although the journey could be bumpy in light of a complicated global macro backdrop.”

The headwinds from the macroeconomy and corporate earnings are persistent. Earlier data showed that China’s purchasing managers’ index for the manufacturing sector pointed to contraction for a third consecutive month in May.

Elsewhere, Meituan, the country’s biggest on-demand delivery firm, might say on Thursday that its first-quarter losses widened from a year earlier.

Shanghai’s stock market has maintained trading throughout the lockdown, except for public holidays and non-trading days in early May. The city’s daily infections tally fell for the 11th consecutive day, according to the official data released on Wednesday, and dropped 52 per cent to 15 in the past 24 hours.

Foreign buying has returned. Overseas traders bought 1.72 billion yuan (US$257 million) of yuan-traded stocks through the exchange link programme on Wednesday, which was heading for a fourth straight day of inflows. The current streak will be its longest since January, if buying continues through the day.

In Hong Kong, CSPC Pharmaceutical Group, NetEase and Techtronic Meituan were the biggest decliners on the benchmark and fell by more than 3 per cent.

Alibaba Group Holding retreated 1.6 per cent to HK$94.70, retreading from an almost four-week high, after Manuel Muehl, a Frankfurt-based analyst at DZ Bank, cut the price target of its American depositary receipts by 15 per cent. Muehl is the most accurate analyst tracking the e-commerce giant among 68 technology analysts tracked by Bloomberg.

Author: Zhang Shidong, SCMP

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