China Sell-off Erases 2024 Gains Amid U.S. Recession Worries

Li Chen
05 Aug, 2024
Hong Kong

Market sentiment continued to weaken in Shanghai and Hong Kong as fears of the U.S. recession grew. 

The Hang Seng index declined nearly 3% and dropped to a 3-month low, and the CSI index fell, tracking losses in Asia. 

Investor sentiment deteriorated after a string of U.S. economic data suggested that the economy may be heading into a recession, reversing the popular narrative of strong consumer spending and business investments. 

The U.S. payrolls expanded at the slowest pace in several years in July, and the jobless rate rose for the fourth month in a row to 4.3%, indicating labor market conditions are moderating. 

In addition, last week, factory activities shrank for the third month in a row, and initial jobless claims approached a one-year high. 

The sudden reversal in market sentiment from soft landing to hard landing was further supported by weak earnings from Intel, Amazon, Alphabet, and Tesla. 

Investors are now thinking that the Federal Reserve may have held interest rates too high for too long and that the central bank may lower rates sooner than expected. 

Closer to home, China's service sector showed an improvement in July, driven by an acceleration in export demand and rising employment, according to a private survey. 

The Caixin China General Services PMI increased to 52.1 from 51.2 in June, according to a survey released by S&P Global. 

 

China Stock Movers 

The Hang Seng index declined 2.6% to 16,512.61, and the CSI 300 index dropped 1% to 3,352.63. 

Internet stocks were among the leading decliners amid worries of a further weakening in earnings. 

Alibaba Group fell 2.2% to HK $73.65, Tencent Holding decreased 1.6% to HK $352.40, and Baidu plunged 4.2% to HK $80.05. 

Electric vehicle markets fell as investors avoided high-flying stocks. 

BYD declined 2.2% to HK $214.40, Li Auto fell 3.2% to HK $71.55, and Xpeng decreased 3% to HK $28.55. 

China Vanke declined 1.7% to HK $3.98, China Resources Land dropped 2.2% to HK $21.85, and Henderson Land Development eased 0.5% to HK $21.80. 

HSBC Holdings plc declined 5.3% to HK $62.15, and Standard Chartered plc plunged 6.2% to HK $68.15.