Hong Kong and Chinese mainland stocks endured a painful day as a combination of rising Covid-19 cases in China, the war in Ukraine and worries about the Federal Reserve raising interest rates this week for the first time since 2018 all knocked investor confidence.
The Hang Seng Index shed 5.72%, or 1,116.58 points, to 18,415.08, having dropped more than 6% in afternoon trade after China locked down the tech hub of Shenzhen.
And China’s stocks fell sharply too as surging coronavirus cases threatened the outlook for world’s second-largest economy and the central bank dashed expectations for a cut in a key lending rate.
The Shanghai Composite Index dived 4.95%, or 159.57 points, to 3,063.97, while the Shenzhen Composite Index on China’s second exchange lost 4.56%, or 96.09 points, to 2,013.37.
Also on AF: China Stocks Hammered as Covid, Sanction Risks Hit Sentiment
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.92%, led by pronounced weakness in Chinese stocks. The index is down 11% so far this month.
Indian stocks also fell and Mumbai’s signature Nifty 50 index was down 1.23%, or 208.30 points, to close at 16,663.0.
But Tokyo’s benchmark Nikkei 225 index bucked the trend, managing to add 0.15%, or 38.63 points, to end at 25,346.48, while the broader Topix index advanced 0.79%, or 14.35 points, to 1,826.63.
Hong Kong’s main board is down 19% so far in March – the index has not fallen so heavily in a month since 2008.
The city’s tech index has been hammered, falling 32% this month as investors worry about the next regulatory crackdown from US and Chinese authorities on the sector.
China Covid Numbers
Adding to market jitters are rising case numbers of Covid in China, which investors fear will hurt the mainland’s economic growth in the first quarter.
China on Tuesday reported 3,602 new confirmed coronavirus cases, compared with 1,437 on Monday.
Oil prices tumbled more than 5%, with Brent crude back at $100 a barrel on concerns about demand from China after the country put more areas into lockdown to fight the spread of Covid.
A lack of major progress in Ukraine-Russia talks on Monday added to the nervousness while concerns are now growing about the potential for new tensions between China and the United States.
Washington has warned Beijing against providing military or financial help to Moscow after Russia’s invasion of Ukraine.
“The question we are asking is whether the markets have reached peak bearishness,” Jack Siu, Credit Suisse’s chief investment officer for Greater China, said.
“We know there has been a lot of bad news, there could be worse to come, stock prices have fallen substantially and there is no clarity on any resolutions from US regulators towards Chinese-listed stocks there.”
Fed Poised To Raise Rates
Investor focus is also on the US Federal Reserve, which meets on Wednesday and is expected to lift interest rates for the first time in three years to offset rising inflation.
All eyes are on whether the Fed pushes a hawkish line and a commitment to keep raising until inflation is under control.
The yield on the benchmark 10-year Treasury notes rose to 2.169%, the highest since mid-2019.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 1.894% in Asian trading, a 2-1/2 year high, before falling back to 1.833%.
The euro, which was hammered last week on concerns the war in Ukraine would hurt the regional economy, rebounded and was last up 0.7% at $1.101. The dollar index fell 0.4%. Gold prices slipped 1% to $1,930.
Key figures around 0820 GMT
Hong Kong – Hang Seng Index > DOWN 5.7% at 18,415.08 (close)
Tokyo – Nikkei 225 > UP 0.2% at 25,346.48 (close)
Shanghai – Composite > DOWN 5.0% at 3,063.97 (close)
London – FTSE 100 > DOWN 1.2% at 7,106.86
West Texas Intermediate > DOWN 5.5% at $97.30 per barrel
Brent North Sea crude > DOWN 5.6% at $100.93
New York – Dow > FLAT at 32,945.24 (Monday close)
- Reuters with additional editing by Sean O’Meara