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Hong Kong stock market
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Hong Kong stocks at around 3-month lows amid risks China-EU trade row could escalate

  • China’s commerce ministry to hold an anti-dumping hearing involving imports of brandy from the EU next week.

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People purchase brandies during the 26th China (Hainan) International the Winter Trade Fair held on December 17, 2023 in Haikou, Hainan Province of China. China’s commerce ministry will hold an anti-dumping hearing involving imports of brandy from the EU next week. Photo: Getty Images
Zhang Shidongin Shanghai
Hong Kong stocks dropped close to three-month lows as the trade rift between China and the European Union (EU) intensified, and Beijing threatened to retaliate against the block’s imposition of additional tariffs on the imports of electric vehicles (EV).

The Hang Seng Index fell 1.6 per cent to 17,524.06 at the close for the lowest finish since April 25. The Hang Seng Tech Index retreated 0.8 per cent and the Shanghai Composite Index dropped 0.9 per cent.

The rally in China’s bond market cooled, with the yield on the 10-year government bond rising for a fourth straight day on Monday, after the central bank said last week that it had borrowed billions of yuan worth of the sovereign debts from primary dealers for sales into the secondary market.

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In signs of rising trade tensions, China’s commerce ministry said it will hold an anti-dumping hearing involving imports of brandy from the bloc next week. Meanwhile, EU ambassador Jorge Toledo criticised China for making it “very difficult” to deepen ties and said that China’s image in Europe had suffered due to its actions related to the Ukraine war.

“The environment in favour of China’s foreign trade may change and that will cause some declines in external demand,” said Fang Yi, an analyst at Guotai Junan Securities in Shanghai. “The risk appetite is low and investors should still stick to value plays in large-caps and blue-chip stocks.”

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Exports are a bright spot in China’s economy, with overseas shipments logging growth in four out of the first five months this year. Investors have turned cautious about Chinese stocks after a rally spurred by state intervention ran out of steam, with focus shifting to corporate earnings and traders craving for more growth-boosting measures. Jonathan Garner, Morgan Stanley’s strategist for Asia and emerging markets, warned that Chinese stocks may face a secular bear market because of the economic headwinds and policy uncertainty.
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