Chinese equities rally lower as 2023 reopens

Chinese shares erased their gains for the year amid growing concerns over the outlook for the country’s economy and the possibility of an unprecedented US debt default.

China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed shares declined 1 percent on Wednesday, bringing the index’s year-to-date loss to 2 percent when accounting for the depreciation of the renminbi against the dollar. In Hong Kong, the Hang Seng China Enterprises index fell as much as 1.6 per cent.

The latest losses for Chinese stocks follow disappointing economic data that suggest the country’s recovery from zero-Covid restrictions has stalled. Official data this month showed record unemployment among Chinese youth, with one in five unemployed.

“Most investors are not convinced about the outlook for the Chinese market,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. Wong said that the Chinese government “can’t really do anything about youth unemployment at the moment”.

“Teenagers don’t want to work in rural areas or factories, they want to work in Alibaba or Tencent,” he said, “but Chinese tech companies are now reducing their workforce.”

Alibaba shares were down 1.6 percent on Wednesday after the company announced it was cutting 7 percent of its workforce in its cloud business.

Elsewhere in the region, Japan’s Topix index – which hit its highest point since 1990 this month – was down 0.3 per cent, and Australia’s S&P/ASX 200 fell 0.5 per cent.

Losses in Asia-Pacific equities came on the heels of a selloff on Wall Street after policymakers in Washington failed to lock in a deal to raise the debt ceiling, less than two weeks before the US government due to default.

The lack of any concrete progress from talks between US President Joe Biden and Republican House Speaker Kevin McCarthy pushed the benchmark S&P 500 index down 1.1 per cent, while the tech-focused Nasdaq Composite shed 1.3 per cent.

In currencies, the New Zealand dollar fell 1.3 per cent against the US dollar after the country’s central bank raised its benchmark interest rate by 0.25 percentage points but ruled out further rate hikes.

“According to the RBNZ’s updated forecasts for the official cash rate, the bank is already tightening,” economists at Capital Economics wrote in a note following the bank’s decision to raise rates to 5.25 percent.

Futures markets sent the FTSE 100 down 0.4 percent at the open, while the S&P 500 was expected to gain 0.1 percent when trading on Wall Street resumed later in the day.