Trade Tensions and Weak Domestic Demand Hamper China Stocks

On Tuesday, China stocks hovered near a seven-month low despite strong export performance in August. Market anxieties about ongoing trade disputes and domestic deflation persisted. In contrast, Hong Kong shares rose driven by a notable leap in Alibaba's shares. Analysts express concern over the sustainability of China's export growth given global economic challenges.

On Tuesday, China stocks hit new lows amid persistent market anxieties over trade disputes and deflation, offsetting strong August export data. In contrast, Hong Kong shares climbed, with Alibaba's shares surging due to their inclusion in the Stock Connect Scheme, allowing mainland investors access.

China's exports skyrocketed at their fastest pace since March 2023 in August, but weak domestic demand dragged down imports. Analysts caution that escalating trade barriers pose significant challenges, despite impressive export figures. Zhang Zhiwei, chief economist at Pinpoint Asset Management, questioned the longevity of strong exports given the weakening U.S. economy and rising trade frictions.

Biotech firm WuXi AppTec Co Ltd saw a fall in share price following a U.S. House of Representatives bill aimed at limiting business with specific Chinese biotech companies on national security grounds. At midday, the Shanghai Composite index was down, along with other major indices. Meanwhile, the yuan slightly weakened against the U.S. dollar.

(With inputs from agencies.)