Chinese stocks retreat after US and Europe post gains

Chinese equities fell on Monday, as investors weighed the impact of new coronavirus restrictions and geopolitical tensions in Ukraine drove oil prices higher.

The Hang Seng Tech index pared back early gains to lose as much as 1.9 per cent. The fall followed a Chinese market rally last week after Beijing said it would introduce “favourable” measures to support the economy and financial markets.

Hong Kong-listed Chinese property stocks fell, with the Hang Seng Mainland Properties index losing as much as 4.8 per cent in early trading after Evergrande, the country’s most indebted developer, suspended trading in its shares. Trading in the company’s electric vehicle and property services units was also suspended.

The Hang Seng index rose 1.9 per cent in morning trading, but later stumbled to losses of as much as 1.2 per cent.

Futures in Europe also slipped, with contracts for the FTSE 100 down 0.1 per cent and for the Euro Stoxx 50 pointing 0.5 per cent lower.

Elsewhere in Asia, China’s CSI 300 lost as much as 1 per cent, Australia’s S&P/ASX 200 closed 0.2 per cent lower, and South Korea’s Kospi dropped as much as 0.7 per cent. Markets in Japan were closed for a holiday.

Oil prices rose, with international benchmark Brent crude up 3.4 per cent to $111.55 a barrel and US marker West Texas Intermediate gaining 2.1 per cent to hit $108.07.

“We have seen extraordinary movements in MSCI China in the past few days as global investors have reassessed their appetite for equity exposure to the world’s second-largest economy,” said analysts at Nomura.

They added that the negativity in the first half of last week was driven by geopolitics, with traders concerned about China’s perceived support for Russia in its war against Ukraine.

Chinese stocks have also been hit by fresh Covid-19 restrictions imposed to battle the country’s biggest outbreak since 2020 and concerns over the direction of Xi Jinping’s “common prosperity” drive, they added.

But analysts at Australia’s Westpac noted that the latest restrictions appeared to be reining in infections quickly. “From the late-2021 GDP pulse and the February activity prints, it seems fair to conclude that the net economic impact of authorities’ zero Covid-19 approach is declining,” they said.

The moves on Monday came after European stocks wiped out losses incurred since Russia invaded Ukraine last month, with indices on both sides of the Atlantic marking the largest weekly advances since November 2020.

The price of aluminium rose after reports that Australia would ban exports to Russia of alumina, a key ingredient, with contracts in Shanghai gaining as much as 3.1 per cent on Monday and contracts on the London Metal Exchange up as much as 4.8 per cent, according to Reuters.