Chinese and Hong Kong stocks fell on Thursday as investors awaited developments in the Middle East conflict. The Chinese CSI 300 index of leading stocks declined by 0.47% by lunchtime, while the Shanghai Composite Index fell by 0.58%. The benchmark Hang Seng Index in Hong Kong also dropped by 1.5%.
In related news, U.S. President Donald Trump stated that Iran is striving to reach an agreement to end nearly 4 weeks of fighting, which contrasts with Iranian Foreign Minister Abbas Araghchi's assertion that the country is considering a U.S. proposal but does not intend to engage in talks to end the conflict.
Market Reactions and Sector Performance
Market participants noted that regional stocks, including Chinese ones, are suffering from a lack of clarity amid uncertainty regarding the course of the war. Daniel Tan, a portfolio manager at Grasshopper Asset Management, stated, "We did not increase our investments when prices fell due to market volatility."
Overall, major sector indices declined, including the food and beverage and cloud computing sectors. However, energy stocks outperformed, recording a rise of 0.5%.
In Hong Kong, the Hang Seng Technology Index fell by 2.2%, with shares of Kuaishou, one of the largest stocks in the market, dropping by 13%.
Background & Context
This decline comes at a time when Trump plans to meet with Chinese President Xi Jinping in May, a highly anticipated visit postponed due to the ongoing Iranian war. Trump has sought support from major oil consumers worldwide, including China, to help reopen the Strait of Hormuz.
Despite the pressures from rising energy prices due to the conflict, Goldman Sachs analysts maintained their recommendation to overweight Chinese stocks. The bank has lowered its forecast for the growth of earnings for mainland Chinese and Hong Kong stocks for 2026 by one percentage point to 12%, reflecting the limited impact of the oil supply shock, noting that China is "relatively insulated" from rising energy prices.
Impact & Consequences
Chinese stock indices have declined, with the Shenzhen index falling by 0.64%, the ChiNext Composite Index for startups dropping by 0.07%, and the Shanghai Star 50 Index, which focuses on technology, decreasing by 1%.
At the same time, the Chinese yuan fell against the U.S. dollar, opening at 6.9043 yuan per dollar, with the last trading price at 6.9047 yuan at 03:05 GMT, a decrease of 61 points from the previous session's close.
Regional Significance
Arab markets are significantly affected by developments in the Middle East, as any escalation in the Iranian conflict could lead to rising oil prices, negatively impacting oil-dependent Arab economies. Additionally, the uncertainty in global markets may affect investments in the region.
In conclusion, the decline in Chinese stocks occurs within a broader context of geopolitical tensions, reflecting the impact of global events on regional financial markets.