Lunar Turbulence: Chinese Stocks Falter Amid Manufacturing Slowdown

Chinese stocks fell due to weak manufacturing activity and fears of U.S. tariffs, despite positive government initiatives. The CSI300 Index and Shanghai Composite dipped, while Hong Kong's tech shares rose. Concerns persist, despite substantial investments from insurers and funds, with utility and banking stocks gaining favor.

On the eve of the Lunar New Year holiday, China's stock market took a hit as unexpectedly poor manufacturing performance and concerns over U.S. tariffs overshadowed Beijing's efforts to attract long-term capital investment. Both the CSI300 Index and the Shanghai Composite closed lower, while tech stocks in Hong Kong buoyed the Hang Seng Index.

In January, China's manufacturing sector experienced its weakest point since August, marking an unexpected contraction. This was partly due to a decline in external demand with the new export orders index dropping to its lowest level in nearly a year, according to Pinpoint Asset Management President Zhiwei Zhang.

The specter of U.S. tariffs loomed large, despite recent delays. Morgan Stanley predicts a sharp increase in average tariff rates on China over the next few years. Meanwhile, regulatory approvals allowed insurers to channel significant funds into stocks, though caution remains advisable, prompting investors to lean towards stable, high-return stocks.

(With inputs from agencies.)