Chinese and Hong Kong equities declined on Wednesday as a global selloff in bonds and rising oil prices dampened investor sentiment, while renewed geopolitical tensions increased concerns over inflation and interest rates.
China's blue-chip CSI 300 Index fell 1.3%, while the Shanghai Composite Index declined 0.8%. In Hong Kong, the benchmark Hang Seng Index dropped 1%, while the Hang Seng Tech Index lost 1.5%.
The weakness followed overnight declines on Wall Street as a global bond selloff intensified. The 10-year U.S. Treasury yield climbed to its highest level since 2023 on Wednesday, adding pressure on riskier assets.
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Oil Prices, Rate-Hike Bets Weigh on Markets
According to Reuters, investors increased their expectations for a U.S. interest rate hike in September as escalating hostilities in the Middle East pushed oil prices higher.
Higher crude prices have raised concerns that renewed inflationary pressures could complicate the outlook for monetary policy. Rising bond yields also tend to weigh on equities by increasing borrowing costs and reducing the relative attractiveness of risk assets.
Gold-related stocks were among the biggest losers in China, with the sector falling about 3%. Gold equities are particularly sensitive to changes in interest-rate expectations because higher yields can reduce the appeal of non-yielding assets.
Auto Stocks Slide After New Guidelines
Auto stocks fell nearly 2% after China unveiled guidelines aimed at promoting fair competition among companies operating overseas.
The decline was broad-based, with technology, new-energy and real-estate stocks also trading lower by midday. Defence stocks, however, outperformed the broader market.
The smaller Shenzhen index dropped 1.27%, while the ChiNext Composite Index, which tracks startup companies, declined 2.18%. Shanghai's technology-focused STAR50 Index was down 1.32%.
Shein Weak Debut Adds to Hong Kong Pressure
Hong Kong stocks also faced additional pressure from the weak performance of online fast-fashion retailer Shein.
Shein shares fell 2.2% by the lunch break on Wednesday, extending losses after a lacklustre debut on Tuesday following the company's long-awaited initial public offering.
The stock's performance added to concerns about investor appetite for newly listed companies, particularly against a backdrop of heightened uncertainty surrounding global trade and tariffs.
Premier Li Signals Openness to U.S. Businesses
On the geopolitical and economic front, Chinese Premier Li Qiang said U.S. companies were welcome to pursue opportunities and expand their presence in the Chinese market.
Li made the comments during a meeting in Beijing with a delegation from the U.S.-China Business Council, highlighting China's efforts to maintain engagement with American businesses amid continuing trade and geopolitical tensions.
Overall, Chinese and Hong Kong markets remained under pressure as investors balanced domestic economic developments against global risks stemming from higher oil prices, elevated bond yields and uncertainty over the U.S. interest-rate outlook.
